Tesco's massive profit margin

Terrontress

Tesco have dropped from a planned 9% profit margin in Ireland to a 7.2% margin in 2010, putting Ireland in its second most profitable bucket.

All this talk of higher Vat, higher wages, higher ground rents does not alter the fact that Tesco makes more from anywhere else except South Korea and if there had not been mass public voting with feet, they would have been happy to make a margin of 20% greater than South Korea

http://www.irishtimes.com/newspaper/ireland/2010/1103/1224282560226.html

Cue the retail apologists....

Nody

You miss the key question though; what were the other retailers doing that allowed Tesco to come in with their huge margins? How high has the other chains beeing fleecing people of to allow Tesco to get second highest margin in the world in Ireland?

bladespin

What's wrong with a margin of 9%? Sounds quite small to me TBH.

How is that a rip-off? Comapred to who or what?

No retail apology but it's not worth doing business if there isn't a profit in it.

Speak Now

Tesco will only match or slightly beat the lowest prices already here, i'd say Lidl and Aldi are making nice margins also.

Terrontress

Nody wrote: »

You miss the key question though; what were the other retailers doing that allowed Tesco to come in with their huge margins? How high has the other chains beeing fleecing people of to allow Tesco to get second highest margin in the world in Ireland?

Exactly! Cosy price fixing and high price margins have existed here for decades. Instead of challenging that, new entrants have simply rolled up their sleeves and jumped upon the bandwagon.

Each big retailer in Ireland is as bad as the other but it is rare that we get a like-for-like comparison of Tesco operations. And if Tesco are making those margins which, given the volume nature of their business, are high, you can bet all the others are as bad or worse!

bladespin

Terrontress wrote: »

Exactly! Cosy price fixing and high price margins have existed here for decades. Instead of challenging that, new entrants have simply rolled up their sleeves and jumped upon the bandwagon.

Each big retailer in Ireland is as bad as the other but it is rare that we get a like-for-like comparison of Tesco operations. And if Tesco are making those margins which, given the volume nature of their business, are high, you can bet all the others are as bad or worse!

Have you any proof of price fixing?

35notout

Shock Horror - a company doing business to make a profit!

Shame on them :rolleyes:

nompere

'Tesco Ireland’s profit margin will rise in the current financial year to over 7 per cent, despite the economic downturn and the slump in the grocery trade, the report by UK stockbroker Shore Capital forecasts.'

So it's guesswork - by a third party.

'Tesco, in common with most of its retail rivals, does not provide separate profit figures for its Irish business. It declined to comment yesterday on the figures contained in the report.'

Which is unsupported by any real evidence.

'Clive Black, an analyst with Shore Capital, said profit margins in the Irish retail trade tended to be high. “It may be easy to hit Tesco over its margins but you need to look at its competitors too.”'

More guesswork - including a suggestion that Tesco's margins are typical and not out of line.

Seems like a non-story.

Fighting Irish

big companies like tesco owe us nothing, if you don't like their prices, don't shop there

91011

Great - my pension which indirectlty has some shares in Tesco, will be a little higher. - Same with thousands of other Irish pensions. - Unlike Dunnes who share profits between 5 people.

7% is about average for grocery - O2 made 24% NET profit last year in Ireland, but no moaning about that anywhere. Debenhams made 13% NET profit.

5%-10% is what a good business should aim to make.

davo10

C'mon everyone knows that Tesco, like all business should operate out of atruism or for the common good and all profits should be returned to the consumer, kind of like a co-operative or say communism.

Newsflash, businesses, all businesses operate to make a profit, and as much profit as possible, if you do not want to purchase their products be they food, electricals, cars etc, don't buy them, that's your right but stop whinging.

Ghandee

91011 wrote: »

Great - my pension which indirectlty has some shares in Tesco, will be a little higher. - Same with thousands of other Irish pensions. - Unlike Dunnes who share profits between 5 people.

7% is about average for grocery - O2 made 24% NET profit last year in Ireland, but no moaning about that anywhere. Debenhams made 13% NET profit.

5%-10% is what a good business should aim to make.

In fairness, there are a fair amount of moans on boards about O2!

Myself being responsible for afair amount of them too!


:D:D:D

Joey the lips

I cant understand why this is a rip off. No one is in business to break even. Tesco is no exception. No one ever said tesco had to sell as cheap as it can and tesco only promise to be cheaper than everyone else...

If tesco is making this profit i wonder what the smaller groups like supervalue etc are making. They may not have the benefit of bigger supplier base but they generally operate in a monopoly situation. In towns rather than on there outskirts.

Tesco promise to be 15% cheaper than leading brands. despite the irony all lidl/Aldi are own brands just packaged to look exclusive. I think tesco could actually learn from this by doing away with there blue and white logo.

The only thing that annoys me about tesco's large profits is the aspect that all our money is effectivly being exported to the brits. However considering the recent exodus of shoppers up north i think i am in the monority. Whats even more strange about my behaviour is i would rather endure the crap checkout service and export my money to germany than actually have mary the nice tesco checkout girl.....

Terrontress

Joey the lips wrote: »

I cant understand why this is a rip off. No one is in business to break even. Tesco is no exception. No one ever said tesco had to sell as cheap as it can and tesco only promise to be cheaper than everyone else...

If tesco is making this profit i wonder what the smaller groups like supervalue etc are making. They may not have the benefit of bigger supplier base but they generally operate in a monopoly situation. In towns rather than on there outskirts.

Tesco promise to be 15% cheaper than leading brands. despite the irony all lidl/Aldi are own brands just packaged to look exclusive. I think tesco could actually learn from this by doing away with there blue and white logo.

The only thing that annoys me about tesco's large profits is the aspect that all our money is effectivly being exported to the brits. However considering the recent exodus of shoppers up north i think i am in the monority. Whats even more strange about my behaviour is i would rather endure the crap checkout service and export my money to germany than actually have mary the nice tesco checkout girl.....

What the issue is Joey is that Tesco had intended to make 9% profit in Ireland last year and 5% in other EU nations. 80% more in Ireland. Due to direct consumer action they reduced their prices to a level just beneath the highest in their global empire. Tesco are like the British Empire, the sun never goes down on Tesco so wide ranging are their markets.

I concede that Tesco's margin is not rip-off compared to other Irish retailers but why should Tesco feel that they should have earnings before tax 80% higher than other EU nations, especially when Ireland has amongst the lowest corporation tax in Europe so the rate of tax taken from the ebt will be less.

Anita Blow

The company is also investing over 100 million euro in the country this year.
Punishing a company for making a profit isn't really how capitalism works is it.

Terrontress

They are not being punished. People are queuing up to hand cash over. Begging Tesco to let them buy their groceries.

And Tesco group know that people will cross the border and they'll probably get the same market share in the Northern shoppers so there is no incentive for them to try to beat the market.

Yes, they are in the business to make a profit but why should they operate a business model where Irish consumers provide 80% more profits than their EU counterparts?

91011

their uk profit margin is 7.3%

Joey the lips

Terrontress wrote: »

What the issue is Joey is that Tesco had intended to make 9% profit in Ireland last year and 5% in other EU nations. 80% more in Ireland. Due to direct consumer action they reduced their prices to a level just beneath the highest in their global empire. Tesco are like the British Empire, the sun never goes down on Tesco so wide ranging are their markets.

I concede that Tesco's margin is not rip-off compared to other Irish retailers but why should Tesco feel that they should have earnings before tax 80% higher than other EU nations, especially when Ireland has amongst the lowest corporation tax in Europe so the rate of tax taken from the ebt will be less.

With respect and not wishing to barate you it still makes no sense to be critical of this imo. To keep the numbers simple. Ireland has a population of 4 million england has a population of 50 million.

Assuming the nations spend the same on shopping a 10% profit in ireland is far far less than a 2% profit in england. It is propper business sense to sit down look at your costs in a region and then establish your margin. I would see myself as socialist there for generally standing up for the poorer person however my idea of socialist pricing is to sell the cheapest in the area it opperates. Not sell cheap because you can.

Tesco promise to be X amount cheaper than its competitors especially on own brand. This promise forces its competitors to lower its price. I would love nothing better than to be critical of tesco. For example the amount of consumer information it generates with its club card, but I have to acknowledge that without them independent retaillers would tear the backside out of me on price...

Terrontress

Joey the lips wrote: »

With respect and not wishing to barate you it still makes no sense to be critical of this imo. To keep the numbers simple. Ireland has a population of 4 million england has a population of 50 million.

Assuming the nations spend the same on shopping a 10% profit in ireland is far far less than a 2% profit in england. It is propper business sense to sit down look at your costs in a region and then establish your margin. I would see myself as socialist there for generally standing up for the poorer person however my idea of socialist pricing is to sell the cheapest in the area it opperates. Not sell cheap because you can.

Tesco promise to be X amount cheaper than its competitors especially on own brand. This promise forces its competitors to lower its price. I would love nothing better than to be critical of tesco. For example the amount of consumer information it generates with its club card, but I have to acknowledge that without them independent retaillers would tear the backside out of me on price...

Tesco have a margin of 5% in Slovakia, a country of 5 million people.
Not much more than Ireland. Why do they attempt to earn 80% more in Ireland than Slovakia?

dayshah

Country size has nothing to do with it. They get this margin AFTER accounting for costs due to economies of scale.

I hope buy lo will shake things up. The have a serious advantage in terms of rent costs as they are getting in near the bottom of the property market. This will allow them charge lower prices.

Joey the lips

Terrontress wrote: »

Tesco have a margin of 5% in Slovakia, a country of 5 million people.
Not much more than Ireland. Why do they attempt to earn 80% more in Ireland than Slovakia?

i dont know enough about the slovakian market to discuss that but I do know that slovakians are comeing over here and not us going over there. It might be an indication of standards of living and available income.

Your still missing my point though. I cannot see why tesco is a rip off. In your context tesco can only be a rip off if its domenant in the market and sells more expensive than everyone else...

There is not much more i can say to you

dayshah wrote: »

Country size has nothing to do with it. They get this margin AFTER accounting for costs due to economies of scale.

I hope buy lo will shake things up. The have a serious advantage in terms of rent costs as they are getting in near the bottom of the property market. This will allow them charge lower prices.

I take it your refereing to my comment. Country size has nothing to do with it your right. I never said it did. I said market size...and believe me this has everything to do with it. Otherwise we would have tesco, asada, sainsburys and all the multiples in here.

I agree with you on rents though. I hope that reduced rents will lead to lower prices. However i disagree with anchor shops bully tactics where they threaten to pull out if rents are not lowered. I feel that we effectivly pay for these rents in bank interest payments etc.

I would also be willing to pay tescos 1-2% more in prices than aldi Lidls. I hate the german retailers policy of fireing shopping into the basket. Something i pulled my local tesco on when they tried to introduce it.

ejmaztec

Terrontress wrote: »

Tesco have a margin of 5% in Slovakia, a country of 5 million people.
Not much more than Ireland. Why do they attempt to earn 80% more in Ireland than Slovakia?

If the home-grown Irish supermarkets hadn't set the level high in the first place, the foreigners wouldn't have piled into Ireland to get a peice of the action.

We can beat them all by not buying anything from any of them. They'll learn a hard lesson when we've all died of starvation.:(

mikemac

7.2% is a decent margin for a well run business

If Tesco Ireland can make this, what kind of margins were Dunnes Stores or SuperValu pulling in before the extra competition? They should be where your rage is directed OP

gerrycollins

Terrontress wrote: »

Tesco have a margin of 5% in Slovakia, a country of 5 million people.
Not much more than Ireland. Why do they attempt to earn 80% more in Ireland than Slovakia?

I believe that Tesco comment come from the fact that they went hard on the market to regain lost share market to the discounters. Maybe this has not happened as much as they would like and in turn have to like any other business or economy to re evaluate their possible target within which they can operate.

they used to have a share market of 27% its currently about 22-24% after all the work they have done this year, however their new store openings will re gain that loss however it will cost them so their profit margin will be smaller obviously as they will have a cost to business increase.

rubadub

Terrontress wrote: »

Tesco had intended to make 9% profit in Ireland last year and 5% in other EU nations.

Did you read your own link? It said

Tesco was aiming to record a gross profit margin of over 9 per cent in the Republic, according to an internal business plan seen by The Irish Times.

No 5% figure, nor other countries mentioned, seems you were trying to infer a 5% average for other countries was in this report.

While really it said

The Irish Ebit (earnings before interest and taxes) margin of 7.2 per cent is the highest in Europe, and compares with 7 per cent in Poland and less than 5 per cent in Hungary and the Czech and Slovak republics. Only South Korea, with a margin of 7.4 per cent, is outperforming Ireland

Presumably the "less than 5%" was the lowest of all, and Ireland is 7.2%, so not the 4% difference you are trying to infer. I am also unsure what this "before interest and taxes" would mean to actual profits they really get.

Terrontress wrote: »

They are not being punished. People are queuing up to hand cash over. Begging Tesco to let them buy their groceries.

Most people I know shop where they figure they get best value for money, I know I do. If people are queing up in tesco rather than dunnes then I would guess dunnes might have less value for money.

It honestly wouldn't bother me if tesco were making 90% profit, I shop where I get best value, which is several shops as different things are better value in different shops, and that is not just looking at price but quality too.

Terrontress wrote: »

Yes, they are in the business to make a profit but why should they operate a business model where Irish consumers provide 80% more profits than their EU counterparts?

You answered your own question! they are in business to make a profit, so why should they NOT operate to maximise their profits. How would a manager explain why they are selling stuff far cheaper than another supermarket when people are obviously willing to pay more.

Terrontress wrote: »

Why do they attempt to earn 80% more in Ireland than Slovakia?

They would be utter idiots not to, its very basic stuff, supply & demand, I see 7 year old girls selling cans in "shops" in their front garden who operate with the same economic principles.

LevelSpirit

Companies are there to make as much profit as possible.
If people pay their prices they will continue to have those and even higher prices.
If they dont, then Tesco will be forced to reduce them and take less profit.

Its up to us. A person on the dole and ra here makes nearly as much money as the average worker in the US. Plenty of money around for the like of Tesco to take off our hands.