Two major UK retailers announced significant stumbles yesterday, with a series of parallels emerging between their poor performances. Tesco was the main headline grabber, with its profits dropping an astonishing £2.7bn to £120m after tax. Meanwhile, JD Sports saw an 18.3% profits drop from £67.4m to £55.1m.

Common to both businesses was a failure in new ventures, with JD Sports’ drop entirely due to losses at its outdoor chains Millets and Blacks, which it purchased in January 2012. Meanwhile, Tesco CEO Philip Clarke announced that the retail behemoth would abandon its US venture Fresh & Easy following £169m of trading losses in the last year – at a cost of £1bn in asset writedowns. On the core-activity front, JD Sports looks healthy, with operating profits rising 4.7%. Tesco, though, suffered an additional setback: a drop in UK trading of 8.3% played out in tandem with a huge £804m property writedown, arising from 100 sites – purchased years ago – that it no longer plans to develop.

Each announcement tells the story of a successful company looking to expand into new markets and territories, and perhaps mistakenly thinking that the same methods that got them into a winning position would apply again. It is, however, early days for JD Sports’ management of its new chains, and they still have chance to apply new techniques to turn them around. But it is not so easy to be sympathetic to Tesco. The company has been heavily criticised for sweepingly adopting the principle of becoming ever bigger and ever cheaper, while failing to alter its strategy to gain a foothold in America. Plenty of their more established US rivals took the opportunity to use that as a selling point.

In the UK, tastes have evolved to the point where customers are no longer basing their purchases simply on price, but the service experience too. This has helped Waitrose and Sainsburys to gain traction with the middle classes. In addition, the property writedown stands as a basic consequence of getting too greedy when times were good. The firm is now paying the price.

Tesco seems to have forged ahead in the US and gone too big, too quickly, while failing to pay attention to its market: a cocktail of cardinal management sins. Clarke will need to act to change things – and arguably is already doing so with the US pullout – but the consequence of rapid expansion is that the ship may be too large to turn around at all.

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Tesco signage image courtesy of JuliusKielaitis / Shutterstock.com