A little bit of Luxury was missing from Tesco

Tesco shares fell 16pc, wiping £5bn off its market cap., as the UK's biggest supermarket group gave its first profit warning in 20 years following disappointing Christmas trading.   These were the headlines that greeted people with their cereal on Friday Morning.

While I know a bit about finance (eer, actually quite a bit but hey), I am less interested in the impact on their shares than why did this happen?   Some retail analysts suggest that it is probably due to the fact that Tesco is more reliant on ‘none-food’ items so has been hit by the general slump but I am not so sure.

My money would be on choosing the wrong advertising campaign (the big price drop) and being too much of a juggernaut to change direction when it became apparent that it simply wasn’t working.    

Christmas is for most people a time when you splurge a little.  However, in the current austere times rather than spending on clothes, perfumes and toys, people are ­– I believe – looking to food to provide that bit of luxury at Christmas.

They don’t want to pay over the odds for their festive fare but want to feel that they are getting something special.  This jarred with Tesco’s adverts which focused on how they provided low prices ‘across the board’.     Personally (and I know this is not right) I don’t care if washing powder is cheaper in the run up to Christmas, I want know my turkey is going to taste good.

Sainsburys, Morrisons and other supermarkets seemed to get this right.  They portrayed a Christmas we can all aspire to but hinted that it would be at a cost we could all stomach.

Will be interesting to see what 2012 brings for Tesco ……….

L x