Tesco Tesco Brand Disappeared Into A Foregone Conclusion, Financial Fraud Led To A Series Of Crises

In the past month, dramatic changes have taken place in the earnings forecast data of Tesco group in the first half of this year. On August 29th, Tesco said that in the six months after the local time in August 23rd, Tesco's trade profit in the British market reached 1 billion 100 million. But in a few days, Tesco said it was expected to make a profit of only 850 million pounds.

Under pressure, Peter Dales, the company's former CEO, admitted that there was a nominal profit of 250 million pounds (2 billion 500 million yuan), and the British food business department appeared a major accounting flaw "early recognition of revenue and delayed recognition of costs". The financial fraud case disclosed by the company's internal prosecution has rapidly escalated to the biggest credibility crisis that Tesco group has ever encountered.

The financial fraud was reported by internal whistle blower, and 8 executives were suspended. According to the follow-up audit conducted by DDT accounting firm, the false number of Tesco is even higher, which is 263 million pounds (about 2 billion 630 million yuan).

In October 23rd, Tesco released its first half performance report. Sales fell 4.6% in the first half of 2014, operating profit fell 41% to 937 million pounds, and revenue dropped 4.5%. Pre tax profits fell by more than 90% over the same period, and earnings per share dropped from 10.17 pence to 0.07 pence, or 99.3%. After the announcement of the performance report, Tesco shares fell 5%.

　　 Tesco Chairman Richard Broder bent announced the resignation on the day of its performance announcement, but the specific date has not yet been announced. A month ago, Tesco had changed the CEO and announced that David Lewis (Dave Lewis) was the new CEO of the company.

The times weekly reporter obtained information from Tesco UK headquarters. The company is considering breaking up its Asian business and establishing an independent company to operate separately to raise 1 billion pounds to ease the financial crisis facing the company.

　　 Strategic mistakes in global expansion

As a leading British retailer and one of the three largest retail businesses in the world, Tesco has 6784 stores and 470 thousand employees worldwide. Apart from the UK, Tesco has been doing business in 13 other countries.

The decline of Tesco has long been a symptom. In April, when Tesco announced its financial data in 2013, it was widely concerned about the "most recent 40 quarter sales decline in the UK," and its UK domestic market share has dropped from the previous 30.3% to the current 28.9%.

In the view of Planet Retail analyst David Grey (David Gray), Tesco's previous failure in global investment strategy is one of the root causes of its current situation. He also pointed out that Tesco has not realized its challenges in the global business in the past two years.

China is a rather serious one in the "challenge". "China is the largest retail grocery market in the world, and it is not surprising that large supermarket chains are eyeing China." Gray commented to the times weekly reporter. "But in recent years, Tesco has turned its main attention to China, Thailand and other international markets, but has neglected the development of the British market."

Gray further explained that the British domestic market accounted for nearly 2/3 of Tesco's revenue and had nearly 30% of the market share, which is the basis for this survival and provided financial support for Tesco's investment and acquisition in the international market.

"One of the simplest examples is that when Tesco wanted to enter the Chinese market, it was through acquiring the equity of Taiwan's Dingxin international group." He said.

Gray also pointed out that at present, because of the wrong investment strategy, Tesco has been caught in the dilemma of internal and external difficulties. In addition to the decline in sales in the domestic market, Tesco is facing an explosive decline in the world's nine major international markets.

It is worth mentioning that Tesco's investment in the US market has failed since September last year. At that time, Tesco announced the sale of its 150 depleted Fresh&Easy store in the United States to the Yucaipa Companies of the US billionaire Ron Burkl (Ron Ron), and closed the remaining 50 stores and completely withdrew from the US market.

In a month's time, Tesco announced that it would add 4 billion 325 million yuan to China's retail and real estate properties and cash into Huarun's original venture to create a diversified retailer. After the completion of the transaction, the shareholding of Huarun venture and Tesco in Li Yuan was 80% and 20% respectively. In May this year, the transaction was officially approved.

Tesco's move in China was relentlessly appraised by Shen Jianguo, chairman of the Shanghai consulting retail consultancy company, who was once at the Tesco supermarket, "actually Huarun bought a Tesco China in disguise."

　　 Defeated China

For the Chinese mainland market, Tesco from Britain originally had an ambitious plan.

In fact, the establishment of Tesco supermarket dates back to 1997. It was originally a chain supermarket brand of Taiwan Dingxin international group. In July 2004, Tesco intended to enter the Chinese mainland market and spent 2 billion 100 million yuan on the acquisition of 50% of Tesco, and renamed the supermarket brand as "Tesco Tesco". Tesco also entered the large retail market in the mainland of China.

The proportion of China's equity held by Tesco and Dingxin group in Tesco is 50: 50. In terms of the internal management structure, all the departments of Tesco's headquarters and departments in China are basically 1 to 1 of the dual supervisor's structure arrangement. The British side controls the rights of Tesco's real estate acquisition, acquisition, store location investigation and design, while the Chinese Taiwan management owns Tesco's procurement and operation rights.

This "double supervisor" mode soon broke out the situation of "one mountain can not afford two tigers". After a brief honeymoon, the two sides began to fight against the control of Tesco's Chinese company.

In the view of Yan Qiang, a strategic analyst, the contradiction of management level led to the development of Tesco Tesco supermarket brand in China from the very beginning. It also missed the golden age of the development of the mainland's retail industry.

"Before and after 2004 is the golden period of China's retail industry development, and a large number of foreign giants have settled in. At that time, there was not much difference in the number of stores among foreign retail giants. Carrefour stores were mostly concentrated in the East China region centered on Shanghai, while WAL-MART concentrated in the Southern China area centered on Shenzhen. Later, the two giants in China have become the climates and have completed the layout, but unfortunately, in the early years, Tesco did not seize the opportunities of the times. Yan Qiang said.

Until December 2006, Tesco invested another 180 million pounds (about 2 billion 800 million yuan, then 1 pounds to 15.3232 yuan), buying 40% stake in Tesco from the hands of Dingxin group. Since then, Tesco has held Tesco's shareholding in China from 50% to 90%, while the new group still holds 10% shares.

After 2010, Tesco China entered a high-speed expansion period. At that time, the British headquarters requested that Tesco's business in China would achieve considerable profits by 2015. Britain's growth target for Tesco China is to increase sales to 4 billion pounds (about 41 billion 600 million yuan), and the number of stores will more than double to 200 stores.

The total number of stores in Tesco was 90, which means that in 5 years, the annual expansion of Tesco's stores must be more than 22. Apart from the traditional large supermarket stores, Tesco is also trying to increase the number of convenience stores to expand the company's format and profits.

In 2011, the British Tesco, which was doing "revival dream", issued 725 million yuan offshore RMB bonds in Hongkong. After the financing, it was confirmed by Tesco that it was used in the expansion of the Chinese mainland's retail industry.

At the same time, Tesco has also started commercial real estate business in China. The shopping plaza developed in China is called "Ledu Hui", and it is proposed that a total of 50 clubs will be opened in China by 2015. The investment amount of each commercial real estate project is between 400 million -7 billion yuan.

However, this series of disputes in May of this year, Tesco China's business has been merged into Huarun venture, and it has been exchanged by Li Ruxiong, chief financial officer of Huarun venture, in the mid-term performance press conference: "Tesco's layout in China is quite large, and there are some overinvestment phenomena."

According to the data disclosed by China Resources, China's Tesco business lost 800 million -10 billion yuan last year.

According to the data given by David Grey, the total sales volume of Tesco in China in 2012 was 15 billion yuan, compared with Huarun's sales volume of 79 billion yuan.

　　 Consider splitting Asia Business

Now, the first problem facing the biggest retailer in the UK, Tesco, is how to solve the financial strain caused by internal and external difficulties.

However, Tesco Refused to comment on other issues.

According to reports, the new CEO David Lewis and his team have already put forward a series of plans to raise funds to alleviate the urgent need, and the most promising one is the divestiture of high value Asian business and the realization of capital market financing by separate listing. British analysts estimate that the value of Tesco's Asian business is between 8 billion and 10 billion pounds.

Tesco has the largest share of its international business in Korea and Thailand, and has strong value in Malaysia market. In Korea, Tesco has more than 400 Homeplus brand supermarkets. In Thailand, there are 1700 stores including Tesco Lotus and a series of small stores.

And HSBC has recently predicted that the cost of Tesco coming out of the dilemma and reviving the British market will be more than 3 billion pounds, which will be used to lower prices, hire more employees and improve the quality of the company's food.

But all this will not have much to do with China. Because Tesco was established at the end of May this year.