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Editor's Comment: From king of the British aisles to a £6.4bn loss

Tuesday cannot have been a fun day for Tesco employees.

The whopping £6.4bn loss reported by the UK’s largest retailer highlighted the depth of its calamitous decline in the past four years or so. How far back the roots of its problems go are still being chewed over, but it is the present and future that is concerning chief exec Dave Lewis, who has had a pretty busy 12 months in the super-hot seat.

The grocer - I love that quaint description - is playing catch-up with a rapidly changing retail landscape in which size is not everything, while simultaneously shaking every cupboard in sight to see if any more embarrassing skeletons emerge. Tesco was at pains this week to point out that the massive sum was not a trading loss, more a readjustment of its property assets on its balance sheet. So all those huge sheds that were going to kill off every competitor a few years ago are not so valuable after all. I hope the lawmakers looking at long-overdue business rates reform take note that property values in retail are crazily distorted.

There is plenty of activity among supermarkets, which are massive sellers of clothing, footwear and accessories. It is interesting to note that while all four big players - Tesco, Asda, Sainsbury’s and Morrisons - are adjusting to the new realities of retailing, Primark sails imperiously on. The UK’s largest seller of clothing admitted to flat like-for-likes this week but its relentless expansion policy saw sales increase by 15% to £2.5bn for the 24 weeks to February 28. And its US operation does not debut until September…

At our brilliant Next Generation event on Thursday April 16, I was reminded that the modern value sector could be said to be 30 years old. It was in 1985 that Liverpudlian entrepreneur John Hargreaves opened his first Matalan store in Preston, bringing to these shores the low-cost out-of-town shed concept that impressed him in the States. That store is still in the portfolio, along with 216 others, accumulating sales of well over £1bn. Judging by the investment in its new head office, Matalan - still owned by the Hargreaves family - is set fair for the next three decades.

Who remembers paying £1 for a Matalan “membership card” in the early days? This club idea was a sneaky way of getting round Sunday opening laws (regular stores could not open, but clubs could) but it also gave the company an amazing database to market to. Matalan’s innovations over the years are often forgotten.

Another form of marketing discussed at Next Gen was Net-a-Porter’s decision to launch a magazine - Porter - last year to augment its online and premium luxury fashion website. Former chief executive Mark Sebba explained to our audience of 300 young talents that Net-a-Porter’s research had revealed that 78% of its consumers liked a glossy mag. Additionally, a print product gives the company a platform to do business with the loftiest brands such as Louis Vuitton, Hermès and Chanel, which are unlikely to sell via the site any time soon.

For a magazine fan like me, it was further evidence that the imminent death of this medium has been much exaggerated. Magazines will continue to thrive in conjunction with complementary digital options. Drapers is available to subscribers with the mag, Drapersonline.com, its mobile-optimised site and its app. This last addition has just been overhauled, so if you had problems with it (as I did) a few weeks ago, update it or download the new version for your Apple or Android device and enjoy the many benefits. See Drapersonline.com/app for details.

Readers' comments (1)

  • Yes I remember the £1 pound membership, who remembers the portakabin it all started in, their buying office has certainly changed!
    Let Tesco be a warning for many others who value their property the wrong way. Turn those big sheds into housing much better use and all the utilities are ready to go!

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