AGMs are usually rather dull. There are normally a handful of awkward questions that senior management bat off quite easily and a very brief update on trading since the last update, which usually provides little in the way of key information on the company in question.
However, Tesco’s (LSE: TSCO) AGM on Friday may be a little different (and more lively). Here’s why.
Disappointing Performance
The quarterly update released by Tesco a few weeks ago was very disappointing. Sales were down, prices are being cut yet further and the company seems to be a long way from turning things around. Therefore, although all motions (including those on remuneration) are expected to be passed on Friday, CEO Philip Clarke is likely to field questions on whether Tesco’s strategy of competing solely on price is the right one.
Of course, under Clarke the company has focused on competing with rivals on price which, according to results in recent months, does not seem to be working. Unlike more successful supermarkets over recent years, such as Aldi and Waitrose, Tesco has not emphasised or communicated successfully enough why it is different than rivals. For instance, Aldi has offered alternatives to branded products at far lower prices and emphasised their quality, while Waitrose has stayed relevant on price but offered customers fresher, more local products. Tesco, meanwhile, has just slashed prices and made its deals clearer, which hasn’t been good enough thus far.
Change At The Top?
Indeed, Tesco’s CEO may also be asked whether he is the right man for the job. This point could gather pace in the coming days because another member of Tesco’s senior management team, Neela Mukherjee, resigned from the position of merchandise director earlier this week. This follows the resignation of Tesco’s Finance Director in April and comes amid a major reshuffle in the company’s management team. This shows that there remains a great deal of uncertainty at the top of Britain’s biggest retailer.
Good Value
Friday’s AGM statement is unlikely to show a marked improvement in Tesco’s fortunes and, because it will only cover a few weeks, it is unlikely to provide a great insight. Shares in the company remain good value, with a price to earnings (P/E) ratio of just 10.9, but it could take a shift in strategy or a change in management (or both) before things start to get better. The AGM is unlikely to bring either, but it could sow the seeds for change due to the pressure that is likely to be put on management by major shareholders.