Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning!

By: Nadeem_Walayat

Tesco, Britain's super market giant that continuous to implode as a consequence of a soaring debt mountain against a collapse in profits, a crisis further compounded by multiple investigations into financial irregularities by the regulator and SFO - Serious Fraud Office, appears to be going for broke by launching back to back £5 off vouchers for £40 spend on your next £40 shop offers in an attempt to reclaim its lost customers from the discount retailers.

£5 off for £40 Shop Explained

For every £40 Tesco customers spend in one transaction they will be in receipt of one £5 off voucher to spend on their next £40 shop. Therefore on face value this implies a £5 discount on a £80 spend amounting to a 6.25% discount. The current promotion runs until 9th of November, following which customers have until Sunday the 16th of November to use their vouchers else they will expire worthless.

Strategy

Clearly the strategy to maximise on the overall discount of 6.25% would be to spend just over £40 before completing each transaction so as to gain the maximum number of £5 off vouchers to utilise before the deadline of 16th November by once more repeating checkouts of just over £40.

Exclusions Warning

Unfortunately there will be many customers who whilst attempting to capitalise on the vouchers will find that they are caught out by the small print that despite spending £40 will fail to be in receipt of a printed voucher and that is as a consequence of the long list of exclusions. For instance baby milk, BABY MILK is excluded from the promotion, Why?

Apparently it's because Tesco feels it's unethical for mothers to formula feed rather than breast feed, so what about publishing bogus accounts with doctored numbers running in the hundreds millions prompting a criminal investigation? What about the ethics of that?

This means that whilst customers can get their spend at just over £40 right at checkout, however AFTER the transaction has been completed they do NOT get a voucher! And there is NO WAY BACK because the transaction has been completed!

So in reality many customers who are aiming to play the game of just spending over £40 to maximise the number of vouchers received will fail as a consequence of the long list of exclusions that many will only realise AFTER the transaction has been completed!

To help Tesco shoppers here is the official list of exclusions to be aware of as they will not count towards your shopping total in terms of securing a voucher - Infant milk formulae, tobacco products, fuel, prescription medicines, stamps, lottery, cafe, E-Top-up, savings stamps, opticians, travel money, insurance, gift cards and Paypoint.

Will the Vouchers Save Tesco?

Unfortunately history says NO, for Tesco have so to speak pressed the £5 off Voucher PANIC button many times in the past in response to bad earnings news, so I don't see why this time will be any different, all it will do is just buy Tesco some time ahead of the next bad corporate news story, though off course customers benefit form a potential 6.25% off their shops.

My earlier analysis highlighted key measures that Tesco should take to attempt to recover from the black hole that it has been sliding into.

27 Oct 2014 - Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk

What Tesco Urgently Needs to do

What Tesco needs to do is to remember they are a MARKET for goods and realise that they have fallen for the SAME mistake that ALL mega-corporations tend to make which is one of OVER SUPPLY at TOO HIGH PRICES in the face of demand that has evaporated as a consequence of being under cut by competitors with far lower cost overheads towards which Tesco's supposedly loyal customers have fled.

If I were running Tesco's this is what I would do -

Firstly, I would reorganise all of the stores along the lines of the discount retailers i.e. fewer staff, shorter opening times, and far less frills such as the club card nonsense.

Secondly, I would ONLY stock those goods that are actually in demand AND carried a hefty profit margin that were able to cover costs, so the quantity of goods offered would be greatly reduced by as much as 80% in favour of what is actually in demand at a profit.

Thirdly, I would soon seek to mothball ALL stores that were not able to operate at a profit.

Fourthly, I would either do away with the club cards points system or greatly stream line it, no more wasting countless millions sending out near worthless voucher books that waste time at checkouts and most of which eventually get binned by customers. They only work in the fantasy land of head office, the staff and customers don't like the voucher books ! Better would be an automatic 2% or 3% off the next shop as an encouragement to return.

Fifthly, I would sell off assets abroad such as asia which could be utilised to pay down Tesco's debt mountain before it starts to explode exponentially.

Sixthly, I would go to the shareholders with a plan to reduce the debt mountain, but this can only work IF the earlier measures had been able to bring a halt to Tesco's profits slide.

Unfortunately, I doubt that Tesco's bloated over educated under real world experienced management are competent enough to do what needs to be done who rather than take action may just hope things turn around whilst they play with their spreadsheets producing fancy graphs based on bogus figures, therefore it may already be too late to save Tesco from going bust. Though most probably Tesco is probably now ripe for a hostile takeover as breakup could yield a return of at least £5 billion over total debt and liabilities.

At the end of the day, the likes of Tesco killed off much of Britians high streets and given the law of supply and demand Tesco itself being killed off by the discount retailers today, many of whom will in turn be killed off when customers start to realise the amount of chemical crap that goes into their food products!

The bottom line is it is not too late to save Tesco if urgent action is taken as indicated above. But the Tesco that emerges will not be the same, much leaner and meaner.

By Nadeem Walayat

http://www.marketoracle.co.uk

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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

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