Tesco PLC
Company Profile
Publication Date: 24 Sep 2007
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Tesco PLC
TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4#p#分頁標題#e#
Business Description...........................................................................................5
History...................................................................................................................6
Key Employees.....................................................................................................8
Key Employee Biographies..................................................................................9
Major Products and Services............................................................................14
Revenue Analysis...............................................................................................15
SWOT Analysis...................................................................................................16
Top Competitors.................................................................................................22
Company View.....................................................................................................23
Locations and Subsidiaries...............................................................................29
Latest Company Comment................................................................................30
Latest Company News.......................................................................................38
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Tesco PLC
TABLE OF CONTENTS
COMPANY OVERVIEW
Tesco is a leading retailer in the UK, and one of the largest food retailers in the world. It also sells
non-food goods such as electrical goods and clothing. Tesco is headquartered in Hertfordshire, the
http://www.400190.com/dissertation_writing/MBA/UK and employs about 318,300 people.
The group recorded revenues of £42,641 million during the fiscal year ended February 2007, an
increase of 8.1% over 2006. The operating profit of the group was £2,648 million during fiscal year
2007, an increase of 16.1% over 2006. The net profit was £1,892 million in fiscal year 2007, an
increase of 20.5% over 2006.
KEY FACTS
Head Office Tesco PLC
Tesco Plc
Tesco House
Delamare Road
Cheshunt
Hertfordshire, EN8 9SL
GBR
Phone 44 1992 632 222
Fax 44 1992 630 794
Web Address http://www.tesco.com
Revenue / turnover 42,641.0
(GBP Mn)
Financial Year End February
Employees 318,283
London Ticker TSCO
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Tesco PLC
Company Overview
BUSINESS DESCRIPTION
Tesco is one of the largest food retailers in the world, operating 3,263 stores. The group operates
through multiple store formats, including Extra, Superstore, Metro, Express and hypermarkets. The
group operates in the UK, other European countries and Asia.#p#分頁標題#e#
Its stores stock roughly 40,000 food products. In addition, the group also sells nonfood items including
electrical goods, home entertainment, clothing, health and beauty, stationery, kitchen utensils, soft
furnishings and seasonal goods such as barbecues and garden furniture in the summer. The group
also markets products under its own labels at three levels: value, normal and finest.
The group operates over 1,988 stores in the UK, its largest geographic market. Apart from regular
groceries, the UK stores also have gas stations. The group has become one of UK’s largest
independent petrol retailers. Furthermore, the group has a joint venture with Royal Bank of Scotland
to provide personal finance (Tesco Personal Finance) in the UK.
The group has operations in the rest of Europe, including the Republic of Ireland, Hungary, Poland,
Czech Republic, Slovakia and Turkey. Tesco operates approximately 95 stores in the Republic of
Ireland, 280 stores in Poland, 101 stores in the Hungarian market, 84 in Czech Republic, 48 inSlovakia and 30 in Turkey. Tesco also has operations in Asia, including China, Japan, Thailand,
South Korea and Malaysia. The group operates around 47 stores in China, 109 stores in Japan, 370stores in Thailand, 91 stores in South Korean and 19 in Malaysia.
The group provides online services through its subsidiary, Tesco.com. The group also providesbroadband internet connections (Tesco broadband) and telecommunications services (Tesco Mobile
and Home Phone) through a 50-50 joint venture with O2, a mobile phone company. The group alsoprovides its financial services through its website.
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Tesco PLC
Business Description
HISTORY
Tesco was founded by Jack Cohen in 1919, when he first sold groceries in the East end of London.
The brand name of Tesco first appeared on packets of tea in the 1920s. The Tesco name camefrom the initials of TE Stockwell, who was a partner in the firm of tea suppliers, and CO from Jack
Cohen’s surname.
The first Tesco store was opened in 1929 in Burnt Oak, Edgeware in the UK. Following the successof self service stores in the US, the group opened its first self service supermarket in Maldon in 1956.
英國dissertation網The business expanded from stores to supermarkets, and by the early 1960s, Tesco had becomea familiar household name, selling household goods and clothing.The group established its gasolinestation services in 1974. By 1979, the group’s annual turnover had reached £1 billion for the firsttime.
Throughout the 1990s, Tesco continued its international expansion. In response to a growing Eastern
European market, Tesco opened stores in Poland, Hungary, Slovakia and the Czech Republic.
During the same period, Tesco also ventured into Taiwan, Thailand and South Korea. The group
launched its website in 2000. Tesco announced in 2001 that it formed a strategic relationship with#p#分頁標題#e#
American supermarket Safeway, to take the tesco.com home shopping model to the US. In the same
year, Tesco entered the Malaysian market.
The group purchased T&S, a UK based convenience retailer and it bought HIT, a hypermarket
operator in Poland, in 2002. In 2003, the group purchased the small Turkish hypermarket chain,
Kipa. The chain operated five hypermarkets in the Aegean region with over 1,500 employees. The
group also entered the Turkish and Japanese markets in 2003. In the same year, the group launched
Tesco home and mobile phone. In early 2004, the group announced that it was purchasing the
family-run chain, Adminstore, which operates Europa, Harts and Cullens grocery outlets in the
London area, for £53.7 million.
Tesco faced a hurdle in its acquisition of Adminstore, even though the Office of Fair Trading (OFT)
cleared its bid, as the Federation of Wholesale Distributors (FWD) attempted to block the deal. The
FWD argued that the OFT’s decision was flawed since the acquisition would make it virtually
impossible for independent retailers to open new shops in central London. In the same year, Tesco
signed a 50:50 joint venture agreement with Ting Hsin, for its wholly owned subsidiary of Ting Cao,
which owns the Hymall chain of stores in China, for £145 million. Consensus Business Group and
Tesco agreed to a £366 million sale and leaseback joint venture on its UK property portfolio in 2005.
Tesco and Carrefour swapped assets such as stores in the Czech Republic, Slovakia and Taiwan
in 2005. As part of the agreement, 11 Carrefour stores in the Czech Republic and four stores in
Slovakia were transferred to Tesco. In return, Carrefour received six Tesco stores and two sites in
Taiwan. Tesco acquired 21 former BP Safeway gasoline stations from William Morrison in 2005 and
adapted them to the Express convenience store format.
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Tesco PLC
History
Tesco launched a new internet telephone service in January 2006. The group announced plans of
英國留學生dissertationentering the US in February 2006.The group intends to start convenience format stores on the West
Coast in 2007. The development of the business will be through organic growth, with initial planned
capital expenditure of up to £250 million per year. This move would allow Tesco to build its position
in the world’s largest markets and would further the company’s strategy of International growth. In
May 2006, Tesco launched a range of horse riding products to tap £4 billion a year UK market.
The group launched a new fishing range in June 2006. The range included rods, reels, nets, tackle
and bait boxes as well as a junior starter kit. In the same month, Tesco was named ‘Online Retailer
of the Year’, ‘Grocer of the Year’ and ‘Britain’s Favorite Supermarket’ by Grocer Gold Awards. In#p#分頁標題#e#
July 2006, Tesco bought the Polish convenience retailer Leader Price in a deal worth £72 million.
Leader Price is a convenience retailer with sales of £167 million in 2005. Leader Price is part of the
Casino group. Leader Price operates over 220 stores including some franchises, across Poland,
employing nearly 2,200 people.
Tesco launched Tesco Direct, in non food retail segment for selling non food items to its customers
in August 2006. In September 2006, Tesco launched an organic clothing range by designer Katharine
Hamnett as part of its strategy to offer customers more choice. In the same month, Tesco announced
its plans to open 6 new regional buying offices to increase local sourcing and make it easier for small
producers to sell goods through the Tesco.Tesco announced its plans to launch a range of own-brand
computer software that would offer customers greater choice and competitive prices in the fast-growing
computer software arena in October 2006.
In December 2006, the group opened its flagship environmental store in Wick in the north of Scotland.
In the same month, the company launched in-store apple zones in 12 stores in the UK. Tesco was
voted Consumer’s Favorite Retailer at the Retail Week Awards in March 2007. In the same month,
Tesco entered into a £650 million property joint venture with British Land. In May 2007, the group
launched milk directly sourced from farms under the brand name ‘localchoice’ milk in its stores across
England and Wales.
The company launched Tesco Book Club in partnership with Random House in June 2007. In the
same month, Tesco.com launched a new online property venture, Tesco Property Market.Tesco.com
was awarded a green Oscar for its newly launched zero-emission, electric van fleet in July 2007. In
the same month, Tesco agreed to acquire Dobbies Garden Centers of Scotland for £155.6 million
and roll it out as national chain.
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Tesco PLC
History
KEY EMPLOYEES
Name Job Title Board
Terry Leahy Chief Executive Officer Executive Board
Richard Brasher Director, Commercial and Trading Executive Board
Philip Clarke Director, International and IT Executive Board
Andrew Higginson Director, Finance and Strategy Executive Board
President and Chief Executive Officer Fresh & Executive Board
Easy Neighborhood Market
Tim Mason
Lucy Neville-Rolfe Director, Corporate and Legal Affairs Executive Board
David Potts Director, Retail and Logistics Executive Board
David Reid Chairman Non Executive Board
Rodney Chase Deputy Chairman Non Executive Board
Charles Allen Director Non Executive Board
Karen Cook Director Non Executive Board
E Mervyn Davies Director Non Executive Board
Harald Einsmann Director Non Executive Board
Ken Hydon Director Non Executive Board#p#分頁標題#e#
Carolyn McCall Director Non Executive Board
Jonathan Lloyd Company Secretary Senior Management
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Tesco PLC
Key Employees
KEY EMPLOYEE BIOGRAPHIES
Terry Leahy
Board: Executive Board
Job Title: Chief Executive Officer
Since: 1997
Age: 51
Mr. Leahy has been the Chief Executive Officer of Tesco since 1997. Joining Tesco in 1979, he held
a number of marketing and commercial positions prior to being appointed to the Board of Tesco in
1992.
Richard Brasher
Board: Executive Board
Job Title: Director, Commercial and Trading
Since: 2004
Age: 45
Mr. Brasher has been the Director, Commercial and Trading of Tesco since 2004. He joined Tesco
in 1986. He has held a number of marketing, commercial and store operations positions, most
recently UK marketing directing.
Philip Clarke
Board: Executive Board
Job Title: Director, International and IT
Since: 1998
Age: 47
Mr. Clarke has been the Director, International and IT of Tesco since 1998. Prior to his appointment
he held a number of roles in store operations, commercial and marketing. He is a non-executive
Director of Whitbread.
Andrew Higginson
Board: Executive Board
Job Title: Director, Finance and Strategy
Since: 1997
Age: 49
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Key Employee Biographies
Mr. Higginson has been the Director, Finance and Strategy of Tesco since 1997. He is a member
of the 100 Group of Finance Directors, Chairman of Tesco Personal Finance and a non-executive
Director of BSkyB. He is also responsible for retailing services, including tesco.com, Tesco Telecoms
and Tesco Direct.
Tim Mason
Board: Executive Board
Job Title: President and Chief Executive Officer Fresh & Easy Neighborhood Market
Since: 2006
Age: 49
Mr. Mason has been the President and the Chief Executive Officer Fresh & Easy Neighborhood
Market of Tesco since 2006. Mr. Mason was appointed to the Board in 1995.
Lucy Neville-Rolfe
Board: Executive Board
Job Title: Director, Corporate and Legal Affairs
Since: 2006
Age: 54
Ms. Neville-Rolfe has been the Director, Corporate and Legal Affairs of Tesco since 2006. She joined
Tesco in 1997 and was the Company Secretary from 2004- 2006. She is the Deputy Chairman of
the British Retail Consortium and a member of the China Britain Business Council and of the Corporate
Leaders Group on Climate Change.
David Potts
Board: Executive Board
Job Title: Director, Retail and Logistics
Since: 2004
Age: 50
Mr. Potts has been the Director, Retail and Logistics of Tesco since 2000. He joined Tesco in 1973.
From 1997 he directed the integration of the businesses in Northern Ireland and the Republic of#p#分頁標題#e#
Ireland before returning to the UK in 2000 as the Director responsible for UK Retail Operations.
David Reid
Board: Non Executive Board
Job Title: Chairman
Since: 2004
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Key Employee Biographies
Age: 60
Mr. Reid has been the Chairman of Tesco since 2004. Prior to his appointment he was the Deputy
Chairman of Tesco and has served on the Tesco board since 1985. Mr. Reid is a non executive
Director of Reed Elsevier Group and the Chairman of Kwik-Fit Group.
Rodney Chase
Board: Non Executive Board
Job Title: Deputy Chairman
Age: 63
Mr. Chase is the Deputy Chairman of Tesco. He was appointed a Non-Executive Director in 2002.
He is the non-executive Chairman of Petrofac and a Non-Executive Director of Computer Sciences,
Nalco and Tesoro. He also serves as the Senior Advisor to Lehman Brothers both in the US and
Europe.
Charles Allen
Board: Non Executive Board
Job Title: Director
Since: 1999
Age: 50
Mr. Allen has been a Director of Tesco since 1999. He was the Chief Executive Officer of ITV from
2004 to 2007. He is a Non-Executive Director of the London Organising Committee of the Olympics
and Paralympics.
Karen Cook
Board: Non Executive Board
Job Title: Director
Since: 2004
Age: 53
Ms. Cook has been a Director of Tesco since 2004. She is a Managing Director of Goldman Sachs
International and the President of Goldman Sachs, Europe. She is also a member of the firm’s
European Management Committee and Partnership Committee.
E Mervyn Davies
Board: Non Executive Board
Job Title: Director
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Key Employee Biographies
Since: 2003
Age: 54
Mr. Davies has been a Director of Tesco since 2003. He is Chairman of Standard Chartered.
Harald Einsmann
Board: Non Executive Board
Job Title: Director
Since: 1999
Age: 73
Mr. Einsmann has been a Director of Tesco since 1999. He is on the Board of Carlson Group of
Companies and Checkpoint Systems and is on the Board of Stora Enso Oy, part of the Wallenberg
Group, as well as on the Board of Rezidor in Sweden.
Ken Hydon
Board: Non Executive Board
Job Title: Director
Since: 2004
Age: 62
Mr. Hydon has been a Director of Tesco since 2004. He is also a non-executive Director of Reckitt
Benckiser, The Royal Berkshire NHS Foundation Trust and Pearson.
Carolyn McCall
Board: Non Executive Board
Job Title: Director
Since: 2005
Age: 45
Ms. McCall has been a Director of Tesco since 2005. She is the Chief Executive Officer of the
Guardian Media Group. She is the Chairman of Opportunity Now.
Jonathan Lloyd
Board: Senior Management
Job Title: Company Secretary#p#分頁標題#e#
Since: 2006
Age: 40
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Tesco PLC
Key Employee Biographies
Mr. Lloyd has been the Company Secretary of Tesco since 2006. He joined Tesco as the Deputy
Company Secretary and Corporate Secretariat Director in 2005. Previously, he was working for
Freshfields Bruckhaus Deringer.
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Key Employee Biographies
MAJOR PRODUCTS AND SERVICES
Tesco is a leading grocery retailer, operating about 3,263 stores worldwide. Its products and services
include:
Products:
Food
General merchandise
Electrical goods
Clothing
Household goods
Home furnishings
Services:
Gasoline stations
Broadband internet connections
Telecommunication services
Financial services
Online shopping and financial service provision
Brands:
Cherokee
Florence + Fred
Healthy Living
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Major Products and Services
REVENUE ANALYSIS
Tesco
The group recorded revenues of £42,641 million during the fiscal year ended February 2007, an
increase of 8.1% over 2006. For the fiscal year 2006, the UK, the group's largest geographic market,
accounted for 76.6% of the total revenues.
Tesco generates revenues primarily through single business division.
Revenues by Geography
UK, Tesco's largest geographical market, accounted for 76.6% of the total revenues in the fiscal
year 2007. Revenues from UK reached £32,665 million in 2007, an increase of 8.9% over 2006.
Rest of Europe* accounted for 13% of the total revenues in the fiscal year 2007. Revenues from
rest of Europe reached £5,559 million in 2007, an increase of 9.1% over 2006.
Asia** accounted for 10.4% of the total revenues in the fiscal year 2007. Revenues from Asia reached
£4,417 million in 2007, an increase of 1.1% over 2006.
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Tesco PLC
Revenue Analysis
SWOT ANALYSIS
Tesco is one of the largest food retailers in the world. In addition, the group also sells non-food items,
including electrical goods, home entertainment technology and clothing. Tesco is the largest retail
operating group in the UK.The group’s leading market position in the UK enhances its brand, provides
economies of scale and makes it easier for the group to launch private label brands. However,
intense competition in both domestic and international markets could adversely affect its profitability.
Strengths Weaknesses
Market leadership High dependence on the UK and Europe
Strong performance of Tesco.com Weak returns
Strong brand image Weak inventory turnover
Opportunities Threats
Retail environment in the Eurozone Rising labor wages in the UK#p#分頁標題#e#
Opportunities in private label and non-food High interest rates in the UK
markets Intense competition
Opportunities in India and other international
markets
Difficult conditions in the international
markets
Strengths
Market leadership
Tesco is the largest retail group in the UK. The group had 26% share of the UK grocery market as
of December 2006. It accounted for 56.1% of all UK supermarket shoppers in 2007. In October 2006,
66.2% of the online food and grocery shoppers purchased online from Tesco.Tesco operates 3,262
stores. The group has 30 distribution centres, of which six are dedicated to non-food and clothing.
The group operates through multiple store formats including Extra, Superstore, Metro, Express and
hypermarkets.
The group has a stronger market presence in South Korea as compared to its competitors. One of
its competitors Wal-Mart sold all of its 16 stores in 2006. Another competitor Carrefour also divested
its operations in South Korea in 2006.Wal-Mart and Carrefour had to exit from the South-Korean
market owing to their inability to cater to the taste of the South Korean consumers. In addition, they
failed to win more customers as it was slow to open retail outlets in the South-Korean market.
Wal-Mart also failed in South-Korea owing to its inability to compete with aggressive Korean
discounters.
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Tesco PLC
SWOT Analysis
The group is planning to invest $3.9 billion during 2007-2011 in South Korea. The group’s leading
market position enhances its brand image, provides economies of scale and makes it easier to
launch private label brands.
Strong performance of Tesco.com
Tesco.com is the largest online grocery shopping services in the world. It is the fourth biggest online
retailer in the UK, behind Amazon, Dell and Argos. Its revenues grew by 29.2% in 2007, reaching
£1,226 million in turnover. Tesco.com serves 850,000 regular customers in the UK, which include
households from both urban and rural areas. It gets more than 250,000 orders every week. In the
UK, for parts of the country where Tesco has few stores or where those it has are exceptionally
busy, it has developed a tesco.com-only store.
Tesco.com also offers a digital download which gives customers access to almost 60,000 DVD titles
and games. Anticipating the even larger opportunity in online non-food markets, the group launched
Tesco Direct for catering to non food segment in August 2006 and this was made online through
tesco.com. Tesco has also placed its online non-food ranges like electrical goods, books, wine,
music and movies under one virtual roof - Tesco Extra.
Online shopping has steadily grown in popularity in the UK. In 2006, online spending grew by 33.4%
to £10.9 billion. The online retail sales are forecasted to from £10.9 billion in 2006 to £28 billion in#p#分頁標題#e#
2011. The online retail sales as a percentage of total retail sales are expected to increase from 4%
in 2006 to 8.9% in 2011. With a strong foothold in online services, Tesco is well placed to benefit
from growing online spending. A strong online presence enables the group to serve new customer
segments, avoid investments in physical infrastructure and earn better margins.
Strong brand image
Tesco has an impressive brand image. It is associated with good quality, trustworthy goods that
represent excellent value. Tesco’s innovative ways of improving the customer shopping experience,
as well as its efforts to add value through financial services have resulted in strong brand equity. A
strong brand image, besides enhancing customer retention rates, enables the group to launch more
products under its own labels and allows it to enter new markets and product lines relatively quickly,
as was the case with its entry into the personal finance market.
Weaknesses
High dependence on the UK and Europe
Tesco is heavily dependent on the UK market. In fiscal 2007, it derived 76.6% of its total revenues
from the UK, 13% from the rest of Europe and 10.4% from Asia. One of its competitors, Wal Mart
derived 22.1% of its revenues from its international operations. Another competitor Carrefour derives
over 52% of its revenues from its international operations.
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Tesco PLC
SWOT Analysis
Concentration of operations in the UK and Europe makes it vulnerable to market conditions in this
region and puts it at a competitive disadvantage relative to rivals with a larger presence in fast-growing
Asian markets.
Weak returns
Tesco has recorded weak returns in the last few years. Its return on assets, return on investments
and return on equity during 2005-2007were 7.1%, 8.3% and 16.8%, respectively. Whereas, one of
its competitors Marks and Spencers recorded return on assets, return on investments and return on
equity of 11.4%, 15.2% and 49.3% for the same period.Weak returns reflect the inability of the
management to deploy assets in profitable avenues, and this could result in decreasing investor
confidence
Weak inventory turnover
Tesco has recorded weak inventory turnover in the fiscal year 2007. Its inventory turnover ratio for
fiscal 2007 was 25.1. One of its competitors J Sainsbury recorded an inventory turnover of 29.4 for
the same period. Another competitor, WM Morrisons, recorded an inventory turnover of 32.5 for the
same period. Low inventory turnover ratio indicates that the group is not able to rotate its inventory
faster and does not have an effective inventory management system in place. Low inventory
management could increase the sale of goods on discount. This would affect the group’s revenue
growth in the coming years.#p#分頁標題#e#
Opportunities
Retail environment in the Eurozone
The Eurozone retailing has been showing growth in 2007. In February 2007, Eurozone retail sales
experienced a 1.1% growth compared to February 2006 figures. Again, Eurozone retail sales were
stronger than expected in March 2007, rising 2.2% relative to the same month previous year. In April
2007, they had a 1.6% year on year growth. In April 2007, the food, beverage and tobacco sector
(FB&T) posted a 0.5% rise in sales from March, and non-food sales grew by 2.3% in the Euro area.
FB&T sales in April 2007 increases 0.7% year on year.
In 2006 Eurozone recorded a real GDP growth of 2.8%, the steepest increase since 2000 and is
forecast to continue to grow in 2007. This could improve the profits of large retailers like Tesco, for
whom Europe is the primary market.
Opportunities in private label and non-food markets
The private label market in the UK is witnessing a strong growth in sales. In 2006, out of total
consumer packaged goods (food, beverage and personal care) sold in the UK, 36.7% were private
label products, amounting to £42 billion. Private label market penetration is forecasted to grow to
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Tesco PLC
SWOT Analysis
40.2% by 2011 to an amount of £52 billion. Private label brands provide higher margins than branded
products. Besides retailing branded products, the group sells 400 Value products and more than
1,000 standard own-brands, including Cherokee, Florence + Fred and Healthy Living. The group’s
own brand sales are approximately 50% of its total sales.
Tesco could leverage its strong portfolio of own brands to increase its margins.Tesco’s UK non-food
sales are still small, but hold significant growth potential. Tesco’s non-food sales in UK, totaling
approximately £7.6 billion in 2007, rose by 11.6% over 2006 levels. The non-food segment includes
several integrated non-food categories such as tobacco, household and traditional non-food categories
such as white goods, clothing and entertainment products. Tesco has a market share of only 8% in
UK’s non-food market. With skills in sourcing, supply chain management and merchandising, Tesco
has the strengths to improve its market position in this segment.
Opportunities in India and other international markets
India is the second fastest growing economy in the world.The real GDP growth for India is forecasted
to be around 8.5% in the fiscal year 2007-2008 and 8% in fiscal 2008-2009. The strong economic
growth of India has led to higher personal incomes, which are fueling demand for consumer goods.
The Indian retail industry is expected to grow 14.6% annually during 2005-2010, to reach $517.6
billion by 2010.
The Indian food and grocery retail industry was estimated around $221.1 billion in 2006. It is expected#p#分頁標題#e#
to grow at an average rate of 11.5% during 2005-2010, to reach $336.7 billion in 2010. Several
leading Indian and international groups have already entered the retailing industry to exploit growing
demand for consumer goods from 150-million strong Indian middle class.
Tesco is reportedly planning to enter the Indian market through a joint venture with Hero Group, a
leading Indian automobile sector group. Tesco already operates in other Asian countries such as
South Korea and is, therefore, ideally placed to enter the Indian market. Tesco is, therefore, well
poised to benefit from the growing consumerism and retail industry in India. Tesco is expanding its
operations in other international markets also. In January 2006, the group acquired eight large Makro
stores in Malaysia. In May 2006, the group acquired 11 Carrefour stores in Czech Republic.
It also acquired 27 small stores from Edeka in April 2006. It acquired 146 Leader Price stores in
Poland in December 2006. The group plans to open additional stores in Thailand and South Korea.
In Thailand, Tesco is rolling-out ’Value’ hypermarkets, supermarkets and Express stores alongside
its standard hypermarkets. In addition to about four standard hypermarkets per year, the group plans
to open 30 Value stores, 60 supermarkets and up to 500 Express convenience stores in Thailand
by 2008. As a result, the group’s operating profit is expected to double in both South Korea and
Thailand between 2006 and 2009.
Furthermore, the group proposes to enter the lucrative US market in 2007, starting on the west coast
under the Fresh & Easy Neighborhood Market banner. Growth in international markets would enable
the group to reduce its heavy dependence upon the UK market and allow it to benefit from the faster
growth of other markets.
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Tesco PLC
SWOT Analysis
Threats
Rising labor wages in UK
Labor costs are rising in the UK. The UK government announced that the adult minimum wage rate
would rise from £5.05 to £5.35 per hour in October 2006. The national minimum wage is expected
to further rise to £5.52 an hour from October 2007 in the UK. The rate for those aged 18 to 21 years
would be increased from £4.45 to £4.60 per hour and the rate for workers aged 16-17 years would
increase from £3.30 to £3.40 per hour.
The group employs about 318,283 full time equivalent employees on an average in 13 countries
around the world in the fiscal year 2007. Out of this 58% of employees are located in the UK. An
increase in labor costs would adversely impact the group's margins.
High interest rates in the UK
Though the UK retail market is poised to grow by about 15% during 2006-2011, a slight decline is
expected in 2007. Growth in 2007 at 2.8% will be slightly lower than 2006’s 2.9%. Although the Bank#p#分頁標題#e#
of England cut interest rates in August 2005, they still remain at high levels. Interest rates in the UK
stood at a high of 4.5% at the end of January 2006. This was further raised to 5.25% in January
2007, 5.5% in May 2007 and was proposed to be raised further by 25 basis points to 5.75% in July
2007.
The high cost of credit will act as a brake on consumer expenditure encouraging households to limit
non-essential expenditure, particularly on deferrable big ticket purchases and this could adversely
affect Tesco’s performance.
Intense competition
The UK retail industry is highly consolidated with Tesco, Asda, Sainsbury's and Morrisons dominating
the sector. Tesco is facing intense competition in the retailing business from other supermarkets
and discount stores. Its main competitors include Sainsbury and Asda, in addition to numerous small
and local store operators.Tesco faces intense competition from Asda, which has the second largest
retail market share in the UK.
Competitive pressure in this sector is rising up further with Marks and Spencer’s (M&S) and Waitrose
coming up with expansion plans in the UK. In addition, M&S is also expanding in emerging economies
like India and China. For instance, Marks and Spencer, the UK-based, leading international department
store retail chain, operates a retail chain of 469 owned stores in the UK, Ireland and Hong Kong, as
well as 248 franchisee stores in 30 countries of the world, services over 16 million customers each
week.
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Tesco PLC
SWOT Analysis
The group plans to expand internationally by opening 100 new ‘simply food’ stores in fiscal 2007
compared to 63 ‘simply food’ stores in fiscal 2006. In addition, Marks and Spencer intends to renovate
70% of its stores by Christmas 2007 and increase its floor space by 15% to 20% in fiscal 2007.
Increased competition could lead to pricing pressures, which would reduce the group’s profits.
Difficult conditions in the international markets
Demand for the group’s products and services in part depend on the general economic and political
conditions affecting the countries in which the group operates. Changes in demand for its products
and services can magnify the impact of economic cycles on the group’s businesses. For instance,
in 2006, an improvement in Tesco’s performance in most of Central Europe, Ireland and Turkey was
offset by the effects of continuing weak economy in Hungary. This was a consequence of the strong
economic measures taken by the Hungarian government which reduced consumer spending. As a
result, the group’s non food category was particularly affected.
Political uncertainty in Thailand resulted in difficult business conditions for the group in the second
half of 2006. Though, the group was able to overcome it due to its strong market position but#p#分頁標題#e#
continuance of the situation may affect the group’s performance.
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Tesco PLC
SWOT Analysis
TOP COMPETITORS
The following companies are the major competitors of Tesco PLC
ASDA Group Limited
Carrefour S.A.
Big Food Group Plc, The
J Sainsbury plc
Marks and Spencer Group plc
Royal Dutch/Shell Group
Safeway Inc.
Somerfield
SPAR Handels-Aktiengesellschaft
Wm Morrison Supermarkets PLC
Booker Cash & Carry Limited
John Lewis Partnership plc
ALDI Group
Alliance Boots Plc
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Tesco PLC
Top Competitors
COMPANY VIEW
A statement by Terry Leahy, Chief Executive Officer of Tesco is given below. The statement has
been taken from the company’s 2007 Annual Review:
Tesco is investing for the future and delivering today. These results demonstrate that we have again
made good progress across the Group, whilst making significant start-up investment in new
businesses and coping well with challenging conditions in some markets. These results show that
it has been another successful year for Tesco.
The numbers are solid, the growth is broadly based – coming from all four parts of our strategy –
and we have delivered tangible benefits for shareholders. I’m pleased about that because these
things are never easy. The most encouraging thing about this performance is that we’ve coped well
with the head-wind from recovering competitors, rising costs and tough conditions in some markets.
We’ve come through in good shape and we’ve done it by staying focused on doing the right things
for our customers and at the same time investing for future growth.
I’m a committed Tesco shareholder. For me, the Tesco investment case is about three things: strong,
sustainable growth through serving customers; disciplined investment; and good returns for the
owners of the business – now and in the long term.We have a good track record of delivery on these
things – and there’s more to come.
Growth We have laid solid foundations for future growth. Our new businesses are coming of age –
they are profitable, they have scale and they are competitive. I believe they can now provide us with
years of strong growth – because in ten years, we’ve moved from reliance on a market of 60 million
people to being able to access markets with over two billion people.
I’m also an investor in Tesco because I see the prospect of rising returns – by that I mean both return
on capital employed – and the return of income and capital to shareholders. Last year, we set a new
return on capital employed (ROCE) target – to add another 200 basis points. ROCE grew in 2006/07,
which is a great result given the start-up costs in Tesco Direct and the US – plus almost £400 million#p#分頁標題#e#
of investment in acquisitions. The underlying progress on ROCE has been even stronger – before
the effect of those factors it was up 50 basis points –and we’re on track to hit our target.
It has also been a good year for shareholder returns, which are up 36%. Of course, our shares are
higher in buoyant markets but we’re also doing more to contribute. Dividends are up to approaching
£800 million, driven by last year’s change in policy, combined with the effect of our rising flow of
property profits now ranking for dividend.We have also bought back and cancelled almost £470
million worth of our own shares so far.
We know one of the reasons for the strength of our shares is property. As market yields have fallen,
property has become a bigger element of the embedded value in the business – and we’ve played
our part in raising awareness of this – mainly by selling some. The appetite for property is so strong
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Tesco PLC
Company View
that our two recent Joint Venture (JV) deals achieved a premium to book value of almost 100%, on
initial yields under 4.5%.
This success, and the good experience we have had operating our stores in the JV’s, has encouraged
us to do more. Our enlarged property funding programme is behind the doubling of the share buy-back.
That said, property is an integral part of a retail business – and it is important that we strike the right
balance between returns today and value tomorrow. So we will retain the necessary long-term
strategic strength we see in ownership by keeping at least 70% of our assets in freehold.
To sum up, our focus remains on profitable growth – building on the solid foundations we have laid
over the last ten years. At the same time, we’re always looking to improve the way the owners of
the business benefit from that growth.
As a company we are putting increasing focus on our work with communities and the environment.
We’ve built our success on listening to customers and these things are growing in importance for
them.
That’s why I believe the battle to win their loyalty will increasingly be fought not just on value for
money, range and convenience, but on being good neighbors, behaving responsibly and seizing
challenges such as climate change.
I think these will be positives for us. Customers want to do the right thing – they’re just not always
sure how – whether it’s a healthier diet or consuming in a greener way. It’s a classic consumer need
– and one which I believe Tesco is well placed to meet. That’s why we’ve made it part of the Tesco
Steering Wheel. As investors, you need to know that we see these things as opportunities – so it is
also important that Tesco leads.#p#分頁標題#e#
International Our biggest opportunity for growth and for improved returns is International – and it
underlines the breadth of our business. Overall, we have produced a very good performance –
particularly against the background of political uncertainty and economic problems in three of our
largest markets – Hungary, Thailand and South Korea. This demonstrates that International now
has the size and momentum to get through these things and still deliver.
Two years ago I began to lay out how we had evolved a strategy for international expansion from a
decade of experience. Today, given how much retrenchment is going on among retailers with
international ambitions, I think we can claim that this has developed into one of the most successful
– if not the most successful – approach to international retailing. It is about being flexible; being local;
maintaining focus on a few countries; using multi-formats to reach the whole market; developing
capability; and finally, – once you’ve put in the networks, it’s about building the brand.
I know this approach is now more familiar to you – but I’m going to highlight the significant
developments of the past 12 months using some of these six elements – starting with focus.Through
a combination of organic expansion and several good in market acquisitions, we’ve made excellent
progress in building stronger positions in all of our existing countries.
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Tesco PLC
Company View
Across our 11 markets, we opened 8.2 million sq ft of space – four times the amount added in the
UK and over 50% more than the year before.We plan to add over 7.5 million sq ft more this year –
all of it organic, even without the stores in the United States.We have got much stronger in Central
Europe, through rapid growth in new space and acquisition. For example, sales have increased by
almost two thirds in the Czech Republic – helped by the Carrefour and Edeka stores – taking us into
the leading group of retailers in the market. In Poland, sales were up 22% with only a few weeks’
contribution from the Leader Price stores. These are rapidly being converted to our 1k format – with
sales uplifts so far averaging 25%. Profits rose almost 50% in Poland.
Pushing on faster in these markets is paying dividends. Not only are returns improving – but as the
most profitable and rapidly growing retailer we are able to participate in consolidation from a position
of strength – and buy only the right assets at the right price. In Asia as well, having done the
groundwork in a couple of our newer markets, we’ve used acquisition to get on faster.
The eight Makro stores will double our space in Malaysia when converted. In China, we’ve taken a
controlling interest in Hymall, which now has 47 hypermarkets, including stores in Guangzhou and#p#分頁標題#e#
Shenzhen, plus the first Tesco branded store in Beijing – all of which opened well. 90% ownership
will free the business from capital constraints and permit a faster rate of growth, through freehold
development.
Our progress with multi-format has been very good, giving us more options for expansion and
extending our reach into markets. Our experience means that we are able to calibrate formats more
quickly for local customers, get to profitability and move faster into roll-out.
Our 1k stores are popular with customers and we now have over 200 of them trading across Central
Europe. The universal appeal of Express means that it trades from almost a million sq ft of our
international space. It is well established in Thailand, where we have a good forward programme
and we will double the number of Expresses in South Korea this year – to 79 stores.
Our trials in Japan are going well and we already have 15 Express stores in Turkey. Our first Central
European Express – in Prague – will be opening soon.
The principles behind these formats are common, but the offer is local – designed by local teams
for local customers.We’ve used this approach in putting together our 10,000 sq ft Fresh & Easy
Neighborhood Market format for the US. Preparations for the launch later this year are going well.
We have a strong team of over 150 at El Segundo and the construction of our 820,000 sq ft distribution
centre at Riverside is on schedule.
We plan to open a significant number of stores at launch – across LA, Phoenix, Las Vegas and San
Diego – and we’ve made good progress in obtaining quality real estate for them.
International returns are making steady progress towards the mid teens numbers we require –
improving to 11.5% with a high proportion of capital – over 70% – less than five years old. Looking
at the significant changes over the last 12 months for returns by country – not surprisingly, Hungary
has slipped a bit – because we’ve chosen to push on with expansion in a very weak economy. It will
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Tesco PLC
Company View
come back. South Korea and Thailand have improved but the really pleasing thing is that Poland –
which is our third largest investment and the Czech Republic – have both improved compared with
last year – to like for like cash return on investment (CROI) approaching 10%.
Not only are returns still improving, cash flows are strong too. EBITDA in International was over
£800 million in 2006/07. After working capital gains, this means that International funded more than
90% of its own CAPEX.
United Kingdom
At the start of the year, we set out to make progress in an environment with recovering competitors
and cautious consumers feeling the full effect of last year’s energy cost and interest rate rises.#p#分頁標題#e#
Because we’ve been on good form operationally, we have coped well with those things – delivering
good sales – and also strong profit growth, whilst carrying more than £40 million of start-up costs
on Tesco Direct and the United States.
Two factors have been driving this. First, the real improvements we’ve made to the shopping trip for
customers.We can always get better – but I want to highlight a few things we’ve done this year on
price, service, range and availability.
Our price check survey, which compares 10,000 prices against our leading competitors weekly,
shows that our position has improved again during the year.
On service, the implementation of new checkout technology across our stores means that we can
now monitor and manage the checkout service customers receive much more precisely – by customer,
by store and by the hour. As a result, over 350,000 more customers a week benefit from our
‘one-in-front’ checkout queue promise.
We’ve also made significant changes to our food ranges in response to customer demand, introducing
more Organics, free from, Healthy Living, Wholefoods, Fairtrade and Kids products, as well as over
1,000 more premium lines – including over 250 Finest.
On-shelf availability, which we measure using our in-store picking of tesco.com orders, has also
improved again and more customers are able to buy everything they want.The most marked increase
has been achieved in fresh foods, where we have seen a fifth consecutive year of improvement.
For decades, food has been a falling proportion of total consumer spending. As a business we have
contributed to this – by cutting prices to help people spend less.That won’t change – but the long-term
trend of declining spend on food has changed – it has stopped.
This is significant and I believe we’re seeing a fundamental shift in the priority consumers place on
food.The link between diet and health, interest in cooking, provenance – including local and Fairtrade
– it is more than simply trading up. It is also not just about affluent customers – it’s everyone and
that means it could be a big long term positive for our industry.
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Tesco PLC
Company View
We can see these changes all around the store – with healthy foods growing nearly twice as fast as
the rest of the business. A good example is Organics where sales are growing four times faster. In
just 12 months the proportion of our customers buying organics is up by over a third – to more than
40% – and the growth is fastest among less affluent customers.
Non-food has again made very good progress, with sales growing significantly faster than in our
core operations. It is now a £7.6 billion business in the UK alone – and well over £10 billion for the#p#分頁標題#e#
Group as a whole.
UK non-food sales growth was 11.6% in the year and volume growth was even higher, driven by
our ability to pass on lower prices to customers. Non-food price deflation was over 3%, funded by
our growing scale and supply chain efficiency and the benefits of more direct sourcing in Asia.
Most of our established categories, which benefit less from new space, grew well. For example,
health and beauty sales increased by 9% and so did news and magazines.
The exception was entertainment, where we saw market share gains but weak sales driven by
deflation and the increase in downloading.We are putting plans together to build a strong position
in the digital market.
Our newer categories again saw excellent growth. Clothing sales grew well – up by 16% – in a tough
market, which was partly affected by unseasonal weather.
We made strong market share gains by volume and value. Some product groups, to which we have
been able to allocate more space in our larger Extra stores, did particularly well.
Consumer electronics were up 35%, toys and sport up 30%, DIY and stationery were both up 23%.
Our overall non-food market share is 8%. With our relatively low market shares in many categories,
the growing popularity of our offer with customers, the scope to expand our stores and also sell more
though direct channels, there is a lot of growth to come.
Last September, we started Tesco Direct in a low-keyway to let customers know about it, test the
systems and make sure the logistics were ok. This went well, so a month ago we were able to go
live on the full launch – with 11,000 items on our website, 7,000 of which are in our catalogue.
As well as great prices and wider ranges, Tesco Direct offers customers an unrivalled choice of
ordering and delivery options.
Two-hour home delivery slots have proved very popular. So has the option to pick-up from store –
which is why we’re going to make it available in as many stores as possible – starting with 200 from
this year. The feedback on the launch has been good – the catalogue has been extremely well
received and volumes are encouraging.
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Tesco PLC
Company View
Our retailing services, another indicator of the growing breadth of the business, have made further
good progress – helped by our position as a leading internet retailer. Dotcom was on excellent form,
with sales up 29% and profits – before the start-up costs of Tesco Direct – increasing nearly 50%.
Tesco Personal Finance (TPF) hasn’t been immune from the effects of a difficult retail financial
services market. However, I’m optimistic for the future. TPF is the best business of its kind in the
market, it is high returning and under the new team there, I think it will get back to a faster rate of#p#分頁標題#e#
growth. 50% of TPF’s product sales are now on-line, providing a strong platform from which to build.
Telecoms passed an important milestone in the year – when it moved into profit during the second
half. Customer numbers also rose strongly, attracted by its combination of simple, great value tariffs,
good service and innovative new products.
Summary
In summary:
• Tesco is about growth and we are confident of sustaining strong growth into the future
• We do this by following the customer – and as they change, we change
• At the same time, we can deliver improving returns and tangible benefits for shareholders
• We are playing our part in tackling some of the social and environmental challenges we all face
• We’ve delivered strong results across the Group by making shopping better for customers
• Tesco is about investing for the future and delivering today – and I’m confident that the business
is well-placed to meet the challenges which lie ahead.
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Tesco PLC
Company View
LOCATIONS AND SUBSIDIARIES
Head Office
Tesco PLC
Tesco Plc
Tesco House
Delamare Road
Cheshunt
Hertfordshire, EN8 9SL
GBR
P:44 1992 632 222
F:44 1992 630 794
http://www.tesco.com
Other Locations and Subsidiaries
Tesco Distribution T&S Stores
Tesco House Apex Road
Delamare Road Brownhills
Cheshunt Walsall
Hertfordshire West Midlands
EN8 9SL WS8 7TS
GBR GBR
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Tesco PLC
Locations and Subsidiaries
LATEST COMPANY COMMENT
Tesco: hoping US consumers give it the 'green' light
02 May 2007
Tesco has announced plans for eco-friendly stores in the US.
In addition to the introduction of its "green" stores, Tesco has pledged to spend $1 billion over the
next five years to nearly halve its energy output around the world, which will include spending US$13
million on the installation of solar panel roofing on a new distribution centre in California.
Ethical consumption has seen a wave of growth over the past few years in the US, as many
consumers are using their purchasing power to express wider political and social concerns. Ethical
and environmental issues are also now rife in the film, broadcasting and news media; in 2006,
numerous documentary films covering environmental issues were aired, further ingraining the
importance of such issues on the nations psyche.
In 2004, Datamonitor fieldwork found that 60% of the US population believed it important to buy
ethical or socially responsible products. In the same year, 28% of US consumers said they'd sought
more socially responsible goods compared to the previous year. This trend has continued to gain#p#分頁標題#e#
momentum and in 2006 a further 24% of US consumers said they had sought more socially
responsible goods in the last year.
While adopting an ethical strategy is sure to be a winner with consumers, Tesco will not be alone.
US retail giant Wal-Mart has already released its own future sustainability plans; new guidelines set
by the world's largest retailer require its 60,000 suppliers to reduce packaging, allowing more products
to be crammed into fewer trucks at an estimated cost saving of $4 billion to the retailer and $7 billion
to manufacturers. Tesco will initially be at the head of the pack in terms of environmental issues but
will have to be vigilant if it wants to gain a real foothold in an already highly crowded market with a
number of powerful players.
Tesco: enviable outlook
18 Apr 2007
Tesco announces revenue growth of 10.9% to GBP42.6 billion.
In its domestic UK market, sales continued to climb, up 9.0%, with a particularly strong performance
from the non-food business, which saw sales increase 11.6% during the year. Non-food (excluding
petrol) now accounts for over one-quarter of UK sales and that figure is expected to escalate further
as Tesco Direct starts to assert itself in the market.
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Latest Company Comment
During the past year, international sales increased by 17.9% on a comparable basis to reach GBP11.0
billion, with like-for-like improvement demonstrated across all but one of its territories - the notable
exception being Hungary, where economic conditions remain challenging. The retailer rolled out a
substantial 8.2 million sq ft of international selling area during the year, increasing store numbers
by 484. With international selling space now reaching 40.4 million sq ft, it represents almost 60% of
group total.
The potential for Tesco's international expansion is extraordinary. As CEO Sir Terry Leahy pointed
out at the analysts' presentation, while Tesco has a potential audience of 60 million in its domestic
UK market, when including all of its international markets, that figure reaches over two billion.
Furthermore, the retailer has already demonstrated - substantially better than its rivals performing
on the international stage - its ability to understand and adapt to local market needs. Finally, and
highly importantly, Tesco has shown commitment to markets even when the going is tough, continuing
to plough investment into Hungary as the management remains focused on tapping into latent
demand.
The US will be a harder nut to crack. The US grocery market is characterized by its cut-throat
competition. But, with a substantial pot of cash for investment, a targeted launch and, of course,
track record and a lot of research under its belt, few would write off the likelihood of a Tesco success.
Source: Verdict Research#p#分頁標題#e#
Tesco: swapping Jersey for Zurich
28 Mar 2007
Tesco has moved its discount music & video distribution business from Jersey to Zurich
In the past 12 months the music & video market has been plagued by perpetual price deflation,
thinning retail margins and declining sales. In a bid to improve profitability, music & video retailers
with online platforms have been operating in the Channel Islands in an attempt to exploit VAT
loopholes that allow tax-free CDs and DVDs to be distributed from the Islands.
However, mounting pressure from the government has forced Jersey to crackdown on British retailers
exploiting this VAT loophole and consequently Tesco and other music & video retailers have been
actively looking at other ways to retain this crucial tax break.
It is likely other UK retailers will either close their Channel Island operations, or also move them to
other non-EU locations. The exceptions to this are Play.com and HMV, which we believe will not
face closure due to the large number of staff they employee on the Islands.
The news that Tesco has moved its distribution to Zurich to continue benefiting from this tax break
comes as little surprise. Competing on price is of paramount importance to the retailer, not only
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Latest Company Comment
because it forms the core of its proposition but also because with such a generic product as music
& video, often retailers have little else to differentiate on other than price.
The continued exploitation of this VAT loophole has sparked anger among many smaller UK
businesses who feel they are powerless to compete against the larger players in the market.
Consequently the Forum of Private Business has asked the government to close this loophole for
good.
Tesco has made an important move to ensure its competitive position in the short-term. However,
longer-term, Tesco could be struck by further legislative regulation, which would mean the end to
its off-shore operation for good.
Source: Verdict Research
Tesco: non-food expansion
20 Mar 2007
Tesco has launched the second edition of its non-food catalog.
Traditionally, Tesco has targeted non-food growth through its store portfolio, in particular via its
expanding network of Extra stores. However, as new space opportunities have diminished, the
retailer has turned to new channels of distribution to drive growth.
Launched in September 2006, Tesco opted for a soft launch of its Direct catalog business, giving it
the opportunity to avoid potential technical glitches and logistical issues. Now, with a little more
confidence under its belt, Tesco has ramped up the scale of its offering significantly. And, as well
as the enlarged catalog, Tesco has also announced plans to open up to 200 order and collect desks#p#分頁標題#e#
in-store, helping to improve accessibility and convenience.
This latest launch in the Tesco offensive not only gives the retailer real authority in a growing number
of non-food categories, but also extends the retailer's non-food offering beyond the geographical
catchments of its Extra stores. Crucially, this gives Tesco the ability to better compete with non-food
specialists on a national scale.
The second edition of Tesco's non-food catalog, with its much enlarged assortment and greater
product authority, will undoubtedly raise a few eyebrows at Argos. There will also be implications
for other retailers such as Woolworths, as well as, to a degree, specialists such as Currys, Comet
and even perhaps IKEA.
Though Tesco continues to fire on all cylinders, this venture could still present Tesco with problems.
In particular, Tesco has little experience logistically in transporting large non-food items direct to the
homes of customers. It also has limited after-sales support for high-ticket categories such as
electricals. But despite any potential challenges, given Tesco's track record, it is almost certain this
venture will help Tesco become an even more formidable force in non-food going forward.
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Latest Company Comment
Source: Verdict Research
Carrefour: bid target?
14 Feb 2007
Chairman Luc Vandevelde has purchased E10 million of Carrefour shares, prompting bid speculation.
Despite its size and positioning, in recent years Carrefour has had a tough time. The rise of
discounters in its domestic market put it under severe pressure, while the falling popularity of
hypermarkets - Carrefour's main format - in France also contributed to its struggles. In addition,
Carrefour has pulled out of a number of countries over the last few years, including Japan, Mexico,
the Czech Republic and Slovakia, after failing to find success in these regions. 2006 was, on the
whole, better for the retailer than 2005, though in the fourth quarter its domestic French division
underperformed.
Wal-Mart and Tesco have been touted as possible bidders for Carrefour. As with many retailers,
heavy competition, falling retail prices and rising costs have led them to search for ways to increase
volumes and scale, and acquisitions is one of them.There is also a reasonable geographic fit between
Wal-Mart and Carrefour or Tesco and Carrefour, with each of their domestic markets accounting for
the largest percentage of sales.
If Tesco were to bid for Carrefour, the enlarged group would be able to compete more effectively
with Wal-Mart on a global scale, though Wal-Mart would still be almost twice the size. However, any
bid by either Wal-Mart or Tesco would more than likely lead to the break-up of Carrefour, with the
new owner cherry-picking the more desirable operations and divesting the remaining ones.#p#分頁標題#e#
Further consolidation in the grocery market is set to continue, on a local, national, continental and
global scale. But, despite the relative benefits that could be derived from merging Carrefour with
another global retailer, the chances of it happening remain highly remote. Merging two companies
of this size would be a gargantuan task with many pitfalls, while possible intervention from various
competition authorities across the globe could further muddy the water. Therefore, for the time being
at least, it looks like Carrefour will not come under new ownership.
Source: Verdict Research
Tesco: multi-channel expansion is bad news for rivals
12 Feb 2007
Tesco has announced plans to add 2,000 new lines to Tesco Direct.
Tesco's non-food offer has gone from strength to strength in the last few years. At first, it expanded
aggressively in categories such as music, news and books and, more recently, into areas such as
electricals, home and clothing. Though Tesco continues to drive non-food sales from its stores -
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Latest Company Comment
particularly of late, through the construction of mezzanine floors - in the face of tougher planning
regulations and the possibility of diminishing expansion opportunities further into the future, Tesco
is increasing its attention on new channels of distribution to drive growth.
Tesco opted for a 'soft launch' of the Tesco Direct catalogue in autumn 2006, giving it the opportunity
to avoid potential technical glitches and logistics issues. But, despite the soft launch, the website
has managed to attract over one million hits a week and now, with a little confidence under its belt,
the retailer is ready to ramp up the scale of its offering.
The success of Tesco and its rival supermarket operators in non-food has already pressurized
traditional specialist operators. It is no coincidence that while Tesco has increased its exposure to
categories such as entertainment and books, retailers such as WH Smith, HMV and Woolworths
have found life more challenging. Expanding its authority in new categories such as furniture and
toys will undeniably raise fears among a wider set of specialists, including the likes of Argos and
DSGi.
Tesco's track record of turning everything it touches into gold seems to be an unnerving reality for
competitors in the UK's non-food markets, and the news that it is expanding its reach further comes
only as bad news to the retailer's increasingly long list of competitors.
Source: Verdict Research
Tesco: a dual revolution
19 Jan 2007
Tesco plans to revolutionize green consumption and its business to create a low-carbon economy.
Tesco's four main measures include labeling products with their carbon footprint, enabling consumers
to opt for less polluting products; pushing energy efficient, organic, fair-trade and recycled products#p#分頁標題#e#
through its Green clubcard scheme, including halving the price of energy-efficient light bulbs; reducing
the carbon footprint of its store portfolio and distribution centers by 50% by 2020 and cutting back
on air transport to less than 1% of products.
These moves come on the back of last year's 10-point plan, which included installing wind turbines
and solar panels, sourcing more food locally, encouraging healthier eating and reducing the use of
carrier bags. Moreover, Tesco has already put GBP100 million into a sustainable technology fund
and converted its lorries to run on a 50% biodiesel mix.
Tesco's many critics might argue that the greening of its operations or recently published news that
the retailer will provide affordable housing to its employees are communicated at a highly convenient
time, with the emerging thinking of the Competition Commission Inquiry due to be published.
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One can also ask why Tesco is not going further. The retailer could finally start charging for plastic
bags for example. Packaging, and the waste it generates, could be significantly reduced and Tesco
could stop selling old energy inefficient light bulbs altogether.
Perhaps Tesco has just woken up to the risks the industry faces. The environment should matter
more to grocers than other retailers. They need biodiversity and a stable and functioning global
environment, because they sell natural produce and efficient stock replenishment relies on secure
supply chains, uninterrupted by floods and storms.
Despite the criticisms, Tesco should be applauded. The creation of a sustainable economy takes
time, and change is bound to be incremental, while the substantial GBP500 million investment
suggests a serious commitment to tackling environmental issues. Combined with Marks & Spencer's
freshly unveiled GBP200 million environmental plan, which included a pledge to become carbon
neutral by 2012, a new benchmark could be set. These moves are certain to increase pressure on
other retailers to take environmental issues more seriously, thereby kick-starting the necessary
processes in global retail to combat climate change.
Source: Verdict Research
Tesco: impressive Christmas trading
16 Jan 2007
Tesco has reported group sales up 9.9% in the six weeks to January 6.
Tesco's physical expansion program has underpinned its success. While the likes of Asda and
Sainsbury have ramped up their store opening plans over the past year, Tesco has been busy
working on an immense space drive which is expected to increase its selling space by a phenomenal
two million square foot in 2006/07 alone.
As well as being on track to add almost 100 Express convenience stores to its portfolio by its year
end, Tesco forecasts it will increase its estate of Extra stores from 117 at February 2006 to 141 by#p#分頁標題#e#
February 2007.
Non-food has also been a main driver of Tesco's UK growth and its ambitions to become as big in
non-food as it is in food are entirely achievable. Categories such as clothing, electricals, toys and
homewares have all benefited from a substantial proportion of additional space and are being boosted
by improvements to store environments.
Stronger range architectures and better coverage of higher price points will help lift transaction values
and should drive up margins. And of course Tesco Direct is another addition to the retailer's non-food
arsenal.
While non-food is increasingly taking center stage, Tesco has in no way lost focus on its core food
offer. Despite its scale and complexity, Tesco fully understands that food is at the root of its business.
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Without a strong food offer, it would lack the footfall to target customers with new compelling non-food
ranges. Over the past year, Tesco has continued to innovate, particularly by adapting to changing
customer preferences for health, organic products and locally sourced ranges.
Fundamentally, Tesco's success can be attributed to its relentless nature. While competitors focus
on particular aspects of their businesses, whether quality, organics, space expansion or non-food
development, Tesco pursues every opportunity - including international expansion - with equal
enthusiasm and ultimately, success.
Source: Verdict Research
Tesco: announces price offensive
02 Jan 2007
Tesco has begun the latest grocery price war by cutting prices on 600 key items.
While it has been suggested by some observers that lower price deflation in 2006 was the result of
a more benign competitive environment, there are a number of factors which help counter this
argument. First, inflation in food has increased steeply over the past 18 months driven by a spate
of poor produce harvests, higher market prices for meat and fish and rising factory gate prices in
the Far East. Also, retailers have been forced to pass a range of cost increases onto consumers,
including higher wages, energy and logistics costs.
Secondly, and perhaps more interestingly, in food, over the past 12 to 18 months there has been a
notable shift away from the value-driven agenda that has been so prominent over the past decade.
While price remains absolutely crucial to grocers in maintaining their competitive punch, they are
increasingly turning their focus to premiumization, quality and service as means to differentiate and
add further value.
Premiumization has been a core focus of all the leading players in 2006 and is expected to become
more important this year. In response to a growing consumer trend towards premium food, Tesco
has already significantly enlarged its top-end Finest range, while Sainsbury's Taste the Difference#p#分頁標題#e#
sub-brand also benefited from new lines in 2006 when it was relaunched. Elsewhere, Waitrose is
another retailer to have really leveraged the premiumization trend through the rapid development
of its store portfolio over recent years. Even traditionally more price-focused Asda and Morrisons
are driving premium ranges harder.
Fundamentally, the UK grocery market continues to be a highly competitive trading environment
with price remaining a core driver of loyalty for customers choosing where to shop. But, at the same
time, customers' needs and wants are becoming more sophisticated. It is no longer good enough
to differentiate on price alone, but with cost-price inflationary pressures easing off in 2007, it should
at least be easier for grocers to shout about their price reductions.
Source: Verdict Research
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Tesco: juggernaut continues unabated
05 Dec 2006
Tesco has maintained strong growth in its third quarter.
In Tesco's domestic market the retailer delivered total sales growth of 8.5%, including like-for-like
uplift of 5.6% (when stripping out petrol which was highly deflationary during the period). Like-for-likes
undoubtedly benefited from the maturity of the vast quantity of new space opened in recent years
and the continued double digit growth of high ticket non-food lines.
Also contributing to sales growth was the return of inflation to stores. This is particularly interesting
considering Tesco's increasing proportion of deflationary non-food categories in its sales mix, such
as clothing and electricals. Inflation of 0.8% highlights just how big an impact the rising cost of
ingredients and the swelling price of energy have had on the retailer.
Internationally, Tesco performed well - third quarter sales increased by 17.9% at a constant exchange
rate and by 17.5% at the actual rate. While the retailer will be disappointed by its recently failed
attempt to team up with Bharti in India and rival Carrefour's successful bid for Ahold's Polish
operations, with plans already in place to open 300 stores amounting to 4.5 million square feet in
its international markets during the second half of the year, strong double digit sales growth is nigh
on guaranteed in 2007.
Fundamentally, this set of results further demonstrates that Tesco is firing on all cylinders and is far
from running out of fuel. While its main competitors at home are ramping up product development,
non-food capability and store opening plans, Verdict feels Tesco has little to fear.
All pillars of its strategy have clear direction and, most importantly, the retailer's physical expansion
continues to dwarf its competitors'. In 2006/07 alone, Tesco is on track to open a phenomenal 1.9
million square feet of new space in the UK more than double that of its nearest competitor. Looking#p#分頁標題#e#
ahead, given Tesco's immense property pipeline, that number is likely to be the norm rather than
the exception.
Source: Verdict Research
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Tesco's ethics under scrutiny - report
15 May 2007
Ben Bimberg, a private investor in Tesco and secretary of the campaign group War on Want, has
gathered enough support for the issue of ethics to be included on the agenda for Tesco's annual
meeting in June 2007.
Mr Bimberg told the newspaper he proposed a resolution ahead of the annual meeting. He called
for the company to "take appropriate measures to be independently audited" to ensure that workers
in factories run by its suppliers are guaranteed "decent working conditions, a living wage, job security,
freedom of association and collective bargaining."
Tesco will not bid for Coles
11 May 2007
The Times reports that Tesco decided against conducting due diligence on Coles due to concerns
over the level of investment required for the grocer's recovery.
The newspaper also speculates that Tesco has other expansion priorities - such as the US and Asia,
and that the UK grocer's expansion strategy avoids making acquisitions in mature markets.
Supermarket soups contain excess salt
11 May 2007
The Consensus Action on Salt and Health (CASH) has revealed that almost 25% of the 576 soups
it examined contained over 2g of salt - the average adult is advised not to eat more than 6g of salt
a day.
CASH found that of the canned, packet, chilled, pouch, ready-made and instant soups it tested, the
average soup contained 1.6g of salt, a whole gram over The Food Standards Agency's (FSA) 2010
target of 0.6g per single serving of soup.
Soups containing the highest levels of salt for its serving size came from Baxters and retailers
Waitrose and Wm Morrison Supermarkets, containing 1.3g per 100g. Both Tesco and Asda Group's
economy brand soups also came in for criticism for their high salt content.
Tesco offers GBP100 bottle wine
02 May 2007
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The UK chain has become the first supermarket in the nation to stock a GBP99.99 bottle of wine.
The drink in question is Australian red wine 1999 Penfolds Grange.
The wine has been on sale at certain stores for two months where the retailer says there is demand.
Tesco also said that demand for bottles of wine costing over GBP10 has increased 74% in the last
two years.
The Penfolds Grange brand comes from the Shiraz grape, but also contains a small amount of
Cabernet Sauvignon.
UK supermarkets deny alcohol pricing is irresponsible
20 Apr 2007
The four retailers met with the All Party Parliamentary Beer Group, headed by John Grogan MP,#p#分頁標題#e#
who raised questions about the pricing of alcohol. Mr Grogan has called for an Early Day Motion,
which would end promotions in supermarkets that sell alcohol for low prices.
Claims that the retailers are responsible for binge drinking and a fall in pub and bar trade were
rebuffed by representatives of all four supermarkets, which claim that the majority of alcohol bought
in supermarkets is part of the weekly shop.
Tesco referred to UK's Competition Commission
20 Apr 2007
Tesco was told by the OFT to sell its grocery store in Slough, UK, in 2004, after the retail giant
opened a hypermarket in the same town. However, Tesco claims it is still trying to find a suitable
buyer and as a result, the OFT has handed over the case to the Competition Commission.
The referral follows an enquiry into supermarket dominance at local, as well as national, levels. The
Competition Commission is expected to release provisional findings later in the year.
Shareholder proposes Sainsbury's split
16 Apr 2007
His approach could allow the retailer to return more than GBP4 billion to shareholders disappointed
by the collapse of takeover talks.
He told the Daily Telegraph, "Sainsbury has GBP1.6 billion of debt and a capital value of GBP10
billion. In anybody's book this is a bad capital structure."
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Mr Tchenguiz's plan would see the group's property assets split off into a separate company, which
would be highly leveraged. He increased his holding in the company last Thursday from 4.67% to
5.07%.
Sainsbury is understood to be revaluing its property portfolio and is expected to reveal its findings
next month when it publishes its full year results. Its property investments currently have a book
value of GBP5.4 billion, which could rise to GBP8-9 billion following the revaluation.
Terry Green to stay at Tesco
04 Apr 2007
It is thought Mr Green held early-stage talks with M&S about the possibility of overseeing the retailer's
clothing offer and providing support for the divisional heads, including Kate Bostock, head of
womenswear, the Financial Times reports.
The Telegraph reports that Sir Terry Leahy, chief executive of Tesco, personally intervened to
persuade Terry Green to stay at Tesco.Talks with M&S are believed to have broken down on Monday
night as Stuart Rose apparently refused to match the financial package being offered by Tesco.
UK supermarket fuel problem down to silicon in storage tanks
05 Mar 2007
Several thousand motorists in the region recently complained of vehicle problems after filling up at
supermarket forecourts. Many of the affected drivers reported their cars breaking down because of
contaminated fuel.
Initial tests from retailers Tesco and Morrison found no problems, but fuel distributor Harvest Energy#p#分頁標題#e#
has now stated that the problem can be traced back to relatively high silicon concentrations in the
tanks at Vopak's fuel depot in Essex.
The problem was not originally identified because the presence of silicon is not normally tested for.
According to the BBC, following the findings, Morrison has stopped selling unleaded fuel at 41 sites
in the affected region, while Tesco is draining its unleaded petrol tanks at 150 forecourts in the
Southeast of England.
Meanwhile, as motorists have been avoiding supermarket forecourts in the area, traditional petrol
retailers have been accused of profiteering, by putting up prices on their fuel by several pence.
Tesco seeks partner for Indian expansion
26 Feb 2007
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Tesco is believed to be in discussions with a number of retailers in India, though at present it is
unclear as to what stage talks have reached.Tesco, like all other non-domestic retailers, is prevented
from directly owning multi-brand retailers or supermarkets in India.
英國dissertation網The deal is thought to be very similar to the recent arrangement between Wal-Mart and Bharti.While
Tata Group would be the majority owner and manage the front-end of the business, Tesco would
control the back-end procurement and logistics of the business.
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