£20m new marketing plan from Lidl & eating into Tesco’s profits
Lidl is to stop door-to-door deliveries of its traditional promotional leaflets as it switches to TV, social media and cinema advertising in a bid to broaden its customer base.
Bad news for Tesco. Britain’s biggest supermarket said price wars and slow progress on reforms will eat into its profits this year – and investor dividends. Tesco said a “number of uncertainties, including market conditions” meant it expected trading profit for the financial year of between £2.4bn and £2.5bn. Analysts had expected around £3bn. The board expects to set an interim dividend of 1.16p per share, which is 75pc lower than last year’s payment.
The brightly coloured missives publicising bargains on fitness kit in January, skiing gear in early winter and regular regional specials such as “Spanish week”, are to be confined to stores as Lidl turns to social media and broadcast advertising to spread its message.
“We’ve been really German in the way we are dropping leaflets through letter boxes saying ‘you have to read this and see our prices and come and shop’ … We needed to change to become more of a British retailer not just by what we offer and our quality and price perception but how we engage with our customers,” said Lidl’s Ronny Gottschlich, UK managing director, as he launched the £20m new marketing plan with a glamorous event at London’s Victoria & Albert Museum.
The retailer will spend £20m over the next five or six months on the campaign, which aims to get shoppers spreading the word about their love of the German discounter via social media under the #Lidl surprises banner.
Tesco has issued another profit warning and is to slash its dividend by 75pc as trading worsens for Britain’s biggest retailer. The shock announcement is Tesco’s second profit warning in two months and follows the ousting of Philip Clarke as chief executive last month.
In a sign of the urgency of the situation, Dave Lewis, Mr Clarke’s replacement as chief executive, will now start on Monday, a month earlier than planned.
Sir Richard Broadbent, chairman of Tesco, said the financial performance of the company had been hit by a “combination of challenging trading conditions and ongoing investment in our customer offer”. He said the decision to cut the dividend had “not been taken lightly”.
Tesco shares opened down 8.75pc, dragging down the rest of the retailer sector. Sainsburys fell 5.2, Morrisons dropped 4.7pc and Marks and Spencer slid 2.6pc.