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from Breakingviews:

Tesco’s ambitions earthed by UK retail reality

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By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

When Philip Clarke took over from the Sir Terry Leahy as Tesco’s chief executive in March 2011, he seemed to have one of the sweetest corporate inheritances around. The company was strong in its British home market and growing well elsewhere, although the U.S. expansion remained a work in progress.

But the Clarke era has seen five consecutive quarters of declining like-for-like UK revenues at the once-almost-almighty retailer. The latest announcement, of a 2.3 percent decline (excluding petrol) over the Christmas 2011 trading period, was a shock. It caused a 13 percent drop in the share price on Thursday.

It’s tempting to think that Leahy left Tesco in less good shape than it appeared from the outside, or that Clarke has mucked things up. Is the company’s strategy – low costs and a steady expansion of formats, product lines and total retailing space – flawed? Was Leahy more charismatic and less efficient than it appeared? Does Clarke lack the inspirational touch?

Will Aldi and Lidl open up in posh areas now?

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A report published today by Verdict Research predicts a surge in discount grocers in Britain.  Verdict Research says discounters like privately owned German groups Aldi and Lidl should raise as much finance as possible to aggressively expand in markets where they are under-represented.

This could be good news for the thrifty, middle class shopper – no more need to venture outside one’s turf to areas one would not normally set foot into but which have become a weekly destination because they have a Lidl or Aldi.

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