Tesco’s Christmas numbers were always going to be bad, but not this bad. In the UK, two-thirds of the grocer’s business, same-store sales excluding VAT and petrol fell 2.3 per cent. The company also warned on Wednesday that global profit growth in 2012 will be “minimal”. This implies Tesco’s expected earnings could fall by about one-tenth, calculates Credit Suisse. Investors needed no further excuse: Tesco shares were pounded by 13 per cent.

Innocent bystanders were mowed down in the carnage. Shares in J Sainsbury and Wm Morrison each lost 5 per cent. But Tesco’s poor results are a reflection of company-specific problems. The company has expanded too quickly and has lost business to rivals which have invested more in promotions.

It is encouraging that chief executive Philip Clarke is doing something about it. His first good move is to rein in the unsustainable growth in hypermarkets. The second is to invest in staff. For two decades, Tesco’s sales per employee have consistently been ￡200,000 annually. That means when sales fall, staffing is reduced. As Citi points out, this reduces service and lengthens queues. Treating staff more as a fixed, rather than variable, expense will reduce profits in the short-term, but should drive long-term growth.