The frustration at Tesco head office must be palpable. Another six months double digit top bottom line growth, and the shares dive 11.5p. Meanwhile analysts are busy muttering about lacklustre trading in central Europe and ratings agency Fitch has "weakening financial structure".
To the casual observer, however, it's difficult to see where the UK's number one grocer has put a foot wrong.
Not only has Tesco delivered another set of UK figures bang in line with forecasts, it has moved into a market leading position in the first five overseas markets it entered ­ in record time. Profits from Personal Finance have rocketed from zero to £34m in five years and Tesco has even managed to make money out of online shopping ­ no mean feat considering the ventures of its biggest rivals are still stuck in the red.
So why are some people convinced there are dark clouds on the horizon?
The main bone of contention ­ beyond general uncertainty over the impact of the new Nectar scheme ­ is the disappointing underlying growth in the international division, where Tesco posted flat or negative like-for-like sales in five markets.
Profits are on target, but they are being met through margin improvements rather than strong like-for-like sales growth ­ not the preferred way to make money, says Teather & Greenwood analyst Dave Stoddart. "This does raise a few question marks. In a volume dependent business like this, it's a worry if competition hots up. It does undermine some confidence."
Tesco was originally billing international markets as a £10bn business by 2004-5, says another analyst. "If things carry on as they are, we're looking at more like £8bn. Is that a concern? Well yes, if you are going to get a business that is on a smaller scale than originally thought. The fill-in formats in Thailand and central Europe are all very well, but they will have to go into new countries to meet original targets, and not everyone's sold on Turkey."
By the end of 2003, half of Tesco's selling space will be outside its home market, and the City wants evidence that the colossal capex Tesco has been pumping into Asia and central Europe will filter through to the bottom line, says ABN Amro analyst James Collins. "We estimate that Tesco is at least 25% behind its original sales targets for international. It's kept to profit targets for the year, but it will be harder to meet the numbers going forward."
The fact that Tesco has launched the "biggest promotion in supermarket history" this week to coincide with the launch of the Nectar card also suggests management are taking the Nectar threat seriously, say some industry sources. "There is no doubt Nectar will have an impact in the short term. Nectar is a unique proposition, with exclusive deals making it hard to replicate. I think Tesco's next move will be to press the price button."
City heavyweight Philip Dorgan says they are missing the point however. If Sir Terry is losing sleep about anything at the moment, it's more likely to be the threat of a possible tie-up between Asda and Safeway, than bickering in the City over like-for-like sales in markets making a minimal contribution to group profits, he contends. "I would take these reports very seriously. If these two get together, and there are compelling synergies,Tesco will have more to worry about than Nectar."
Tesco bosses are sanguine about the challenges they faced in overseas markets where competitors have started to raise their game, but say stronger performances in the second half are expected. Meanwhile, stringent control over costs and the introduction of central distribution in South Korea, Thailand and Hungary mean operating margins will continue to improve.
Aggressive pricing strategies are already starting to pay off in the Czech Republic and the Slovak Republic, while flat like-for-likes in Poland represented a "good result" given the challenging market conditions, argues deputy chairman David Reid.
"The message from the latest set of results," says Jonathan Pitkanen from Fitch," is not that Tesco's international strategy is flawed, but that the benefits may be longer in coming than we first thought."