Can Tesco Recover?

Can Tesco bounce back from it’s worst results in a century?

Tesco's 2014-15 results are out on Wednesday, and after a series of scandals and bad headlines, they're expected to be very ugly. 

Pretty much every financial journalist and analyst is expecting a massacre.

The Financial Times suggested that the company may report an annual loss of up to £5 billion ($7.43 billion) on Wednesday, calling it "the worst performance in the near-100-year history of Britain’s biggest retailer".

But global investment banking giant HSBC is staying bullish. They've got a "buy" rating on Tesco shares and a target price of 295 pence. Since the shares are currently at 235.85 pence, if they're right that would be a big windfall for anyone buying now. 

As always, what's most important from an investment perspective is the trajectory — not just how the company did in the last year, but how it's going to do. 

Some think Tesco has improved notably under new CEO Dave Lewis, who came from Unilever and had barely begun in the job when the company was forced into an embarrassing £250 million profit restatement, and the full extent of the company's financial weakness became clear.

Despite that, Tesco has been catching up with the industry in terms of sales growth, after a period of massive under-performance, and it's now no longer losing significant market share:

What about the competition?

While Germany's ruthless discounting supermarkets are still hitting the headlines, Aldi and Lidl's actual effect on the market is becoming a bit more muted. From a peak about a year ago, sales growth at both firms seems to be slowing, and market share growth is too.

There are major advantages to the fact that Tesco is an absolutely massive business — with a market capitalisation of more than £19 billion and over 300,000 employees in the UK, the company has some significant advantages that simply come from its scale.

Here are three major scale advantages that underpin Tesco’s margin advantage - simply how much profit the company is making in comparison to sales, so a 300bp margin means profits which are 3% of revenues:

•  Buying power: For the same amount of turnover in terms of sales, Tesco's buying power offers it an advantage. If Sainsbury and Tesco both make £1 billion in sales, HSBC reckon all else being equal Tesco would make 0.3 percentage points more in terms of profit — and every little helps.

•  Fixed costs: Costs like advertising are more expensive for smaller companies if they want to match Tesco. They say Sainsbury would have to spend 0.45 percentage points of its total sales to match Tesco if the larger firm spent 0.25 percentage points of its total sales. Again, individually these don't break the bank, but in a margin-thin industry like retail, it accumulates and makes a difference.

•  Networks and logistics: This one is probably the simplest. With more employees, stores and pretty much everything else, distributing its goods around the country costs Tesco less per mile, or per pound earned. 

Even if the news is awful tomorrow, Tesco has the foundation to be a solid company for years to come.

STOP Telling Yourself Stories

STOP Telling Yourself Stories

Pretty much everyone has an area of our life in which we feel trapped. This might be due to external circumstances or personality trait. It might have held us back for years.

We feel that we don't have the strength to change it, but we feel miserable at the prospect of being stuck in this position.

We realise that it won't change on its own. We don’t think we can change it. So we are stuck simply accepting it as normal.

Accepting this as normal is destructive. And it is also a lie. 
The point to understand is that we are not victims. When we adopt this mindset, to feel powerless over our situation we are not victims. We have made a choice to accept the situation and become a martyr.

Before you get angry at my comments, let me be clear in saying that I am not implying that the bad things in your life are your fault. The past happened. For whatever reason it happened. Sometimes there is no reason to why things happened. In life we get dealt a hand of cards, whatever we get dealt is in the past and no one can change the past.

But how you play those cards – that is the present, and that’s all under your control, even if you like to tell yourself a story that it’s not. You may be telling yourself you’ve “done your best,” but in reality, you’ve just folded at the table and said the game is over. 

You see, we get addicted to our stories. They let us stay safe, instead of enduring the fear of facing ourselves and the discomfort of growth.

Do you know what’s really easy? Telling ourselves we have no options.

Do you know what’s really hard? Taking responsibility and taking action. Because a lot of times, the action we know we need to take is uncomfortable and something we just would like to pretend isn’t an option … so we come up with all sorts of stories why those options aren’t valid for “someone like us.”

“I’m too old.” 

“I’m not old enough.” 

“I’m not smart enough.” 

“It’s too late for me.” 

“I don’t have _____.” 

And the kicker, “You just don’t understand. I ________.”

I understand perfectly. 

Here is what I understand – no matter what the struggle, no matter what story we tell, there is someone out there who is weaker than we are, worse off than we are, more tired than we are … who is conquering our problem without complaint.

It amazes me how many people with “nothing” end up accomplishing and overcoming more than people with “everything.” So it’s not about resources. It’s not about courage or willpower or talent or skill. It’s about a simple decision that losing is not an option that’s going to be considered.

When you decide in your heart that you are going to refuse to lose, you change your entire mindset – your strategy, your reactions, everything – and you tackle your burdens from a whole different angle. You stop accepting the “victim” mentality and you start looking for anything and everything that will help you make one of two changes:

Change #1: Change Your  Circumstances

Changing your circumstances can take a lot of work, and that’s why most people never do it. The people who don’t change their circumstances focus on their ideal situation and how it’s impossibly out of reach for them (so what’s the point of even trying?). Every potential option is met with an excuse, a reason why it won’t work for them.

I am an excellent excuse maker but willing to bet that you can relate?

Think about the resistance you feel to options when they’re presented to you. Think of the excuses you make, all the flaws in the strategies you take based on what you imagine might happen if you tried them.

If you dig deep enough you’ll realise that the real roadblock for you isn’t that you “can’t” make something work, but that you “won’t” do it. The fear, the excuses, the worry about the consequences taking action … that’s what’s really in your way.

There’s power in “next.” You can handle “next.” Maybe next won’t work this time, maybe it will. You’re guaranteed to have failures and successes, but the point of it all is that it’s almost inconceivable to be truly out of options. Sure you may not like the options in front of you, they may be uncomfortable and painful and require you to demonstrate greater courage than you have in the past, but they are options.

So stop hiding behind “I can’t” and admit that the issue is really “I won’t.” Because when you stop hiding behind the excuse and call yourself on the carpet, something miraculous often happens: you suddenly develop the courage to give that option a try.

There’s something almost magical about facing your fears – the act of doing so can make you realise that you don’t really have to be afraid, that the downsides to “failure” aren’t such a big deal and that you’re braver than you think. Or maybe it’s just the embarrassment behind facing up to “I won’t” that makes you decide, “I will.”

The bottom line is that you have options. Don’t hide behind imagined roadblocks and pretend they’re taking away your power. Truth is, you’re giving it away. Stop focusing on how you’d like things to be and instead focus on what single thing you can do today to move yourself forward. Do that, and you’ll get there eventually.

But circumstances aren’t everything, and sometimes you don’t even have to change them to make a huge stride forward in your life. Sometimes all it takes is …

Change #2: Change The Meaning of The Situation

You can’t change the past, but you have total control over your personal interpretation of what the past means to you. And your personal interpretation – your “story” – is 100% your responsibility. You can’t push that onto anyone else, because what goes on in your head is your own doing – you own it.

If you own your story it is a very, very good thing, because that means you can do anything you want with it.

This is another situation where you have a choice: You can either give away all your power and let other people / circumstances create a sad, sad story for you or you can decide that you’re going to thrive in the midst of the crap you’re going through and use it to empower yourself instead of drain you.

Bad cards get dealt to you, I understand that. And I also understand that we picked a few of those bad cards ourselves. Crap happens, and while I truly don’t mean to devalue the very real pain of your past, I urge you to consider the present, and how you need to take ownership of your interpretation of those events.

You can let the pain of the past drag you down, or you can “refuse to lose” again and decide that you’re going to use the pain to create a positive experience in the present and future.

Screw feeling sorry for myself because at my worst I had it better than the millions of people starving and dying in third-world countries.

I have failed at all of this because I’m just as fallible as everyone else. But I have also succeeded at this enough to feel like that mindset is crucial. The commitment to creating good out of a bad experience is the antidote to  pain, and I urge you to commit to it.

You can rewrite your  story into one that’s not devoid of sadness, but is bittersweet in the way that the pain is transformed into meaning.

I don’t know why the painful things in life happen and frankly it doesn’t matter. What does matter is the meaning we inject into it. I always think of the example of Nelson Mandela, who took his 25 years in prison and instead of looking at it as unjust punishment, framed it as an opportunity to mentally prepare for leading his people in the future. Bad cards become better. But the problem with that example is it makes us think, “Well, I’m no Mandela. I’m just me.”

I’m no Mandela. I’m not  special or talented, or anything you can’t be. All I did was refuse to let the pain of my circumstances be in vain. I decide to create some good in my negative circumstances.

And I challenge you to do the same. Embrace the pain you’re feeling right now. Ask yourself how you can guarantee that your suffering isn’t in vain. Help people. Help yourself. Take your sad, sad story and use it for good.

Every great story has sadness in it. You treasure the bittersweet stories you read because they connect with the pain you know is part of the reality and the good you believe just has to be there in the midst of it.

Make your own story bittersweet. If you can’t change the past, change your present. And write your own future.

I hope you’ve found these words helpful.

Just one more thing before you go … I’d like to ask you to do one important thing for me – spread the word about this blog.

And when you’re done with that, use the comments below to tell me how you’re going to rewrite your own sad, sad story into something better. 

That is all -

David

Make A 'Reasons I Freaking Rock' List For Yourself

Self-doubt sucks. Yet it chases us daily, looking to tear down our good feelings about ourselves. Some days you keep ahead of it, and you feel great and kick the world’s ass. Other days, it’s you that’s taking a beating – and hard.

I can’t tell you how many times people have told me they know what to do – and even know how to do it – but they just can’t get it done because of the paralyzing effect of self-doubt. And when I say “people” I’m not talking about chronic procrastinators or no-hope layabouts … I’m talking about people all the way up the spectrum, from mildly successful to seven-figure earners.

Self-doubt can take the wind out of anyone’s sails. And it does. Frequently.

Here’s how to put the wind back in those sails no matter how you’re feeling today.

Today’s kick ass lesson is a simple one – make a quick list of reasons you freaking rock at whatever it is you’re about to do. Just take a moment – right now – and think about the last few times you felt good about your abilities, and really pull those memories back up.

Maybe you received a really encouraging email or tweet from someone saying you did a great job, or you really made a difference in their life. Maybe you passed an exam or certification or practiced hard to gain a new skill. Maybe you won an award, or fixed a problem, or maybe it’s as simple as you being there when someone needed you.

Whatever it is, that’s relevant to your struggle, think back to the victories and relive the emotion … and put down the reasons you freaking rocked on a short list. An index card you can carry with you. A post-it you stick to your laptop. 

Lists prevent you from taking yourself for granted

When you’re good at something, it’s generally something that’s important to you. Because it’s important to you, it’s likely you have mentors or “heroes” that you look up to – and since they’re so much “better” than you are, you downplay your skills and talents and think they’re nothing special.

But they are. Those skills and talents can make things happen in your life and the lives of others, and if you take them for granted, you’re going to take weak action and doubt your abilities.

You’re going to compare yourselves to others and think you’re not good enough. You’re going to think about your past successes and tell yourself that it was just a fluke, or that you don’t have it in you for a repeat performance.

Recognise the bullshit you tell yourself by putting into words all the reasons you should be proud of yourself. Make a list of the reasons you’re really good at what you do. And if you believe you are only kind of good, make a list of all the reasons you’re at least “good enough.” And if you’re just getting started, just make a list of all the progress you’ve made.

Your Assignment:

Tell Me 3 Reasons You Rock At What You Do

You’re better at this stuff than you give yourself credit for. Start giving yourself credit and make your own ‘Reasons I Freaking Rock’ list. And when you start losing steam and doubting yourself, come back to this list for some encouragement.

For now, leave a comment and tell me 3 reasons you should be proud of yourself / your skills / your progress. If you’re not comfortable putting your name, just put ‘Freaking-Rocker’ in the name field and no one will know who you are. Just put it in writing, and get it done today.

Then write this list down for yourself, and put it somewhere handy. Do it now – you’ll thank yourself for it.

That is all.

David

P.S. – Once you’re done, spread the word so others can make their own ‘Reasons I Freaking Rock’ list. (Please forward this blog to at least one person today who needs this kick!)