Tesco

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Tesco plc

<tr><td colspan="2" style="text-align:center; padding:16px 0 16px 0;">Image:Tescologo.svg</td></tr>

Type Public (LSE: TSCO)
Founded 1924
Headquarters Image:Flag of the United Kingdom.svg Cheshunt, England

<tr><th style="text-align:right; padding-right:0.75em;">Key people</th><td>Sir Jack Cohen (founder), Sir Terry Leahy (CEO)</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Industry</th><td>Retail</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Products</th><td>Groceries, Consumer goods, financial services, telecoms</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Revenue</th><td>£38,259 million GBP1</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Operating income</th><td>£2,210 million</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Net income</th><td>£1,576 million</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Employees</th><td>389,258 (2005)</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Subsidiaries</th><td>Tesco Stores Limited
Tesco Ireland Limited
Tesco Personal Finance (50%)</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Slogan</th><td>"Every Little Helps"</td></tr><tr><th style="text-align:right; padding-right:0.75em;">Website</th><td>www.tesco.com</td></tr><tr><td colspan="2">1. Results for 52 weeks ended 25 February 2006</td></tr>

Tesco plc is a United Kingdom-based international supermarket chain. It is the largest British retailer, both by global sales and by domestic market share, and the fourth largest retailer in the world behind Wal-Mart of the United States, Carrefour of France, and The Home Depot of the United States. Tesco has a market value of about £29.090 billion (October 2006)<ref>Template:Cite web</ref>.

Originally specialising in food, it has diversified into areas such as clothes, consumer electronics, consumer financial services, selling and renting DVDs,<ref>Template:Cite web</ref> compact discs and music downloads, internet service consumer telecoms and most recently budget software.

Contents

[edit] Facts and figures

Tesco's revenue for the 52 weeks to 25 February 2006 was £38.259 billion. In 2006 it adjusted the accounting date for its non-UK and Ireland operations, and including 60 weeks of non-UK and Ireland operations revenue was £39.454 billion. Group profit before tax was £2.210 billion for the 52 week period and £2.235 billion including 60 weeks of non-UK and Ireland turnover.

According to TNS Superpanel Tesco's share of the UK grocery market in the 12 weeks to 18 June 2006 was 31.4%. Across all categories, over £1 in every £8 of UK retail sales is spent at Tesco. Tesco also operates overseas, and non-UK revenue for the year to 25 February 2006 was 23% of total revenue.

[edit] History

[edit] Formation

Image:20040801-008-tesco.jpg
First self service Tesco, St Albans, England

Tesco was founded, as a one-man business, by Jack Cohen in London's East End. He came from a modest background, being the son of a Polish Jewish tailor. He began by selling groceries in the markets of the East End after World War I in 1919. At this time rations and supplies were low, so he would buy damaged goods from other businesses and resell them at reasonable prices. Famously, Jack was known for his ability to tell what was in a tin just by shaking it.

The Tesco brand first appeared in 1924. The name derived after Jack Cohen bought a large shipment of tea from T.E. Stockwell, he made new labels by using the first three letters of the supplier's name (TES) and the first two letters of his surname (CO) forming the word "TESCO".<ref>Template:Cite web</ref>

The first Tesco store was opened in 1929 in Burnt Oak, Edgware, London.

[edit] Incentives and price-cuts

The founder, Jack Cohen, was an enthusiastic advocate of trading stamps as an inducement for shoppers to patronise his stores: he signed up to Green Shield Stamps in 1963, and became one of the company’s largest clients.<ref> http://cep.lse.ac.uk/seminarpapers/24-05-04%20-%20Background%20paper%20by%20Geoffrey%20Owen.pdf Seminar Papers 2004</ref> But Cohen was a fan of pile it high and sell it cheap, and in the mid-70s Tesco faced many cost problems associated with not properly integrating its purchased chains of stores. When the firm overstretched itself buying the Victor Value stores chain, management consultants were called in to sort out the mess. In 1977 Tesco launched Operation Checkout, an across the board price cutting campaign aimed at countering the threat from the new breed of discounters such as Kwik Save. A key decision was to abandon Green Shield stamps, thus saving some £20m a year and helping to finance price reductions. Other traders didn't like it and attempted to sue Tesco for breaching the retail price maintenance law, but Cohen wasn't charged and the law was eventually abolished.<ref>http://www.dg.dial.pipex.com/comment/z051128c.shtml</ref> In 1975 Tesco opened one of the UK's first Hypermarket in Irlam

[edit] Expansion

In 1994, the company took over the Scottish supermarket chain William Low. Tesco successfully fought off Sainsbury's for control of the Dundee-based firm, which operated 57 stores in Scotland. This paved the way for Tesco to expand its presence in Scotland, which was weak compared to England. To the present day, Tesco has based its Scottish headquarters at the former Wm. Low offices in Dundee. From small beginnings in Scotland - Inverness was recently branded as "Tescotown",<ref> "Tesco accused of 'near monopoly'", BBC, January 17, 2006.</ref><ref> Template:Cite web</ref> since an estimated 50p in every £1 spent on food is believed to be spent in the three Tesco stores within the city.<ref> Lorna Martin. "The supermarket that ate a town", The Observer, January 1, 2006.</ref> (Nationally, it is estimated that 1 in every £8 is the proportion spent) It introduced a loyalty card branded 'Clubcard' in 1995 and later an Internet shopping service.

The Sunday Telegraph of 28 October 2006, suggested that Tesco.com is the only profitable on-line grocer on the planet.[citation needed]

During the 1990s it expanded into Central Europe, Ireland and East Asia. In July 2001 it became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks. In October 2003 it launched a UK telecoms division, comprising of mobile and home phone services, to complement its existing internet service provider business. In August 2004, it also launched a broadband service.

Image:Tesco shelter.jpg
Shopping trolley shelter

Tesco's principal acquisitions, in addition to opening its own stores, include the following chains:

In the late 1990s, the typeface of the logo was changed to the current one shown on the top of the page with stripe reflections underneath the typefaces as Tesco used them on their carrier bags.

[edit] Corporate strategy

  • An "inclusive offer". This phrase is used by Tesco to describe its aspiration to appeal to upper, medium and low income customers in the same stores. According to Citigroup retail analyst David McCarthy, "They've pulled off a trick that I'm not aware of any other retailer achieving. That is to appeal to all segments of the market".<ref>

Hannah Liptrot. "Tesco: Supermarket superpower", BBC, June 3, 2005.</ref> By contrast ASDA's marketing strategy is focused heavily on value for money, which can undermine its appeal to upmarket customers even though it actually sells a wide range of upmarket products. During its long term dominance of the supermarket sector Sainsbury's retained an image as a high-priced middle class supermarket which considered itself to have such a wide lead on quality that it did not need to compete on price, and was indifferent to attracting lower-income customers into its stores. This strategy has been abandoned since losing the number 1 spot to Tesco and particularly since the arrival of Justin King as CEO in 2004 who has established a new customer-focused strategy closer to that of Tesco.

  • One plank of this inclusivity has been Tesco's use of its own-brand products, including the upmarket "Finest" and low-price "Value". The company has taken the lead in overcoming customer reluctance to purchasing own brands, which are generally considered to be more profitable for a supermarket as it retains a higher portion of the overall profit than it does for branded products.
  • Customer focus: Sir Terry Leahy, chief executive since the mid 1990s, has taken the bold step of trying not to focus on the usual corporate mantra of "maximising shareholder value". The company's mission statement reads, "Our core purpose is, 'To create value for customers to earn their lifetime loyalty'. We deliver this through our values, 'No-one tries harder for customers', and 'Treat people how we like to be treated'". The underlying aim is of course to make higher profits, but there is a clear focus on customer service at the top level of the company.
  • Diversification: The company has a four-pronged strategy:
    • "Core UK business" - That is, grocery retailing in its home market. It has been innovative and energetic in finding ways to expand, such as making a large-scale move into the convenience-store sector, which the major supermarket chains have traditionally shunned.
    • "Non-food business" - Many United Kingdom supermarket chains have attempted to diversify into other areas, but Tesco has been exceptionally successful. By late 2004 it was widely regarded as a major competitive threat to traditional high street chains in many sectors, from clothing to consumer electronics to health and beauty to media products. Tesco sells an expanding range of own-brand non-food products, including non-food Value and Finest ranges. It also has done quite well in non-food sales in Ireland. CDs are one of the best examples, with Tesco Ireland promising to sell all chart CDs (except compilations) for €14.95 compared with HMV Ireland or Golden Discs selling the same for around €20.
    • "Retailing services" - Tesco has taken the lead in its sector in expanding into areas like personal finance (see below), telecoms (see below), and utilities. It usually enters into joint ventures with major players in these sectors, contributing its customer base and brand strength to the partnership. Other supermarkets in the United Kingdom have done some of the same things, but Tesco has generally implemented them more effectively, and thus made most profit.
    • "International" - Tesco began to expand internationally in 1994, and in the year ending February 2005 its international operations accounted for just over 20% of sales, or about £7 billion (approximately $13 billion). It has focused mainly on developing markets with weak incumbent retailers in Central Europe and the Far East and now in 2006 they are going to branch out in the United States. The medium term aim is to have half of group sales outside the United Kingdom. Tesco rolls out successful UK initiatives in other countries. For example Tesco Personal Finance and Tesco Express convenience stores both operate in several markets.

[edit] UK operations

[edit] Formats

Tesco's UK stores are divided into five formats, differentiated by size and the range of products sold.

  • Tesco Extra are larger, out-of-town hypermarkets that stock all of Tesco's product ranges. The first Extra opened in 1997.
    Image:Tesco.jpg
    Tesco Extra, Southport, England
    The 100th store opened in the 2004/05 financial year. The number of these is now being increased by about 20 a year, mainly by conversions from the second category. Typical size 6,300 m² (68,000 square feet). As of January 2006 Tesco's largest UK store is in Peterborough and is 18,300 m² (190,000 square feet). This store is unusual in being raised on stilts to maximise space utilisation. For comparison a standard Wal-Mart Supercenter in the U.S. is around 18,400 m² (200,000 square feet). Tesco Extra stores can also be on two floors, ground floor for mainly food and first floor for clothing, electronics etc.
  • Tesco stores are standard large supermarkets, stocking groceries plus a much smaller range of non-food goods than Extra. They are referred to as "superstores" for convenience, but this word does not appear on the shops. It is the "standard" Tesco format, accounting for the majority of UK floorspace. Most are located in suburbs of cities or on the edges of large and medium-sized towns. The typical size is 2,900 m² (31,000 square feet).
  • Tesco Metro stores are sized between normal Tesco stores and Tesco Express stores. They are mostly located in city centres and on the high streets of small towns. Typical size is 1,100 m² (12,000 square feet). The first Tesco Metro was opened in Covent Garden, London in 1992. Since then all Tesco branches that have a high street format including those which opened before the Covent Garden branch have been subsequently rebranded from Tesco to Tesco Metro probably to give an identity to the Tesco high street sub brand. The Tesco store in Devizes was the last store to finish rebranding, in September 2006. The store had not been renovated for over 20 years.
  • Tesco Express stores are neighbourhood convenience shops, stocking mainly food with an emphasis on higher-margin products (due to lack of economies of scale) alongside everyday essentials. They are found in busy city centre districts and small shopping precincts in residential areas, and on petrol station forecourts. There were 654 stores at 25 February 2006 year end, with a typical size of 190 m² (2,100 square feet).
  • One Stop are the only category which does not include the word Tesco in its name. These are the very smallest stores. They were part of the T&S Stores business but, unlike many which have been converted to Tesco Express, these will keep their old name however they do stock Tesco branded products and some have Tesco Personal Finance branded cash machines. There are more than 500 of them. One Stop Stores also work on a different pricing and offers system to the other Tesco stores, and generally have later opening hours than all except the 24-hour Tesco Stores. Typical size 125 m² (1,350 square feet).

In May 2005 Tesco announced a trial non-food only format in Manchester and Aberdeen,<ref> Template:Cite web</ref> and the first store opened in October 2005:

  • Tesco Homeplus stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco is trying this format because only 20% of its customers have access to a Tesco Extra, and the company is restricted in how many of its superstores it can convert into Extras and how quickly it can do so. Large units for non-food retailing are much more readily available. It plans to open at least three more Homeplus stores in 2006.<ref>Template:Cite web</ref> As of 2 October 2006 Homeplus remains a "trial" format and no decision has been taken on expansion beyond the three stores already open and two that will open shortly.<ref>Tesco Interim Results 2006/07, Page 9</ref> The Staines branch opens on Monday 27th November 2006.

[edit] Store summary at 25 February, 2006

As of 25 February 2006, at the end of its 2005/06 financial year, Tesco's UK store portfolio was as follows.

Format Number Total area (m²) Mean area (m²) Total area (sq ft) Mean area (sq ft) Percentage of space
Tesco Extra 118 740,000 6,270 8.0 million 67,800 30.9%
Tesco 445 1,280,000 2,880 13.9 million 31,200 53.7%
Tesco Metro 163 180,000 1,100 1.9 million 11,650 7.4%
Tesco Express 654 130,000 200 1.4 million 2,140 5.4%
One Stop 517 65,000 127 0.7 million 1,350 3.6%
Total 1,897 2,395,000 1,260 25.9 million 13,650 100%

[edit] Tesco Personal Finance

Tesco has a banking arm called Tesco Personal Finance, a 50:50 joint venture with the Royal Bank of Scotland. Products on offer include credits cards, loans, mortgages, savings accounts and several types of insurance, including car, home, life and travel. They are promoted by leaflets in Tesco's stores and through its website. The business made a profit of £139 million for the 52 weeks to 25 February 2005, of which Tesco's share was £70 million.

This move towards the financial sector has diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.

Tesco personal finance offer Loans, car loans, Instant access saving accounts, Business credit card, bonus credit card (the credit card that pays you interest back), Clubcard credit card (where you can earn 1 point for every £4.00 spent on it) and mortgages. Tesco also offer insurance including Travel insurance, pet insurance, car insurance, life insurance, home insurance and car breakdown cover in accosation with green flag. A key marketing strategy is Tesco offering clubcard points or free petrol when you buy Tesco car insurance.

[edit] Telecoms

Tesco operates ISP, mobile phone, home phone and VoIP businesses. These are available to UK residential consumers and marketed via the Tesco website and through Tesco stores.

Though it launched its ISP service in 1998, the firm did not get serious about telecoms until 2003. It has not purchased or built a telecoms network, but instead has pursued a strategy of pairing its marketing strength with the expertise of existing telcoms. In autumn 2003 Tesco Mobile was launched as a joint venture with O2, and Tesco Home Phone created in partnership with Cable & Wireless. Tesco Mobile offers both prepaid and PAYG (pay-as-you-go) accounts. In August 2004 Tesco broadband, an ADSL-based service delivered via BT phone lines, was launched in partnership with NTL. In January 2006, Tesco Internet Phone, a Voice over Internet Protocol, VoIP, service was launched in conjunction with Freshtel of Australia.<ref>"Tesco launches net calls service", BBC News, January 19, 2006.</ref>

Tesco announced in December 2004 that it has signed up 500,000 customers to its mobile service in the 12 months since launch. In December 2005, it announced it had one million customers using its mobile service. In April 2006 it announced that it had over one and a half million telecom accounts in total, including mobile, fixed line and broadband accounts. [1]

[edit] Fuel

Tesco first started selling petrol in 1974. Tesco sells 99 RON petrol on a retail basis (a fuel developed by Greenergy of which Tesco is a shareholder). For a time this fuel held the title as the highest octane rated petrol available in the UK on a retail basis. [citation needed]

[edit] Internet operations

Tesco has operated on the internet in the UK since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco also has Internet operations in the Republic of Ireland and South Korea. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store. In contrast to the warehouse model followed by Waitrose's home delivery service partner Ocado, this model, which is now also applied by competitor Sainsbury's, allowed rapid expansion with limited investment, but has been criticised by some customers for a high level of substitutions arising from variable stock levels in stores. Nevertheless, it has been popular and is the largest online grocery service in the world. In 2003, tesco.com's CEO at the time--John Browett--received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service

In 2001 Tesco invested in GroceryWorks, a joint venture with the American Safeway Inc. (who had long since sold-off their UK subsidiary and Tesco's former rival, Safeway plc), operating in the United States and Canada. GroceryWorks has stepped into the void left by the collapse of Webvan, but did not expand as fast as initially expected and Tesco sold its stake to Safeway Inc in 2006.<ref>Tesco Interim Results 2006/07, page 4</ref>

Concerned with poor web response times (at the time of its launch in 1996, broadband was virtually unknown in the UK), Tesco offered a CDROM-based offline ordering program which would connect only to download stock lists and send orders. This was in addition to, rather than instead of, ordering via web forms, but was withdrawn in 2000.

Tesco claimed in its 2005 annual report to be able to serve 98% of the UK population from its 300 participating stores. In the financial year ended 25 February 2006 it recorded online sales up 31.9% to £948 million and profit up 54.9% to £56.2 million. [2]

Tesco launched its first home shopping catalogue in autumn 2006, as another channel for sales of its non-food ranges. This is integrated with the internet operation, with both channels being branded as "Tesco Direct".<ref>Tesco gears up for catalogue drive in autumn, retail-week.com, 21 July 2006.</ref>

Tesco launched an advertising campaign for its internet phone, marketing the service to customers by offering free calls to all other Tesco internet phone customers.

On 1 October 2006, Tesco announced that it will be selling six own-brand budget software packages for under £20 each, including office and security suites, in a partnership with software firm Formjet [3]. As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.

[edit] High-tech services

Tesco offers broadband services.

The company also has a digital photo shop that offers products such as, mugs, shirts, celebration cakes and table mats. The service is powered by pixology.

DVD rental is also an option and can only be accessed via the web. Music downloads are also available.

[edit] Operations outside the UK

Image:Tesco-lotus-logo.gif
Thailand's Tesco Lotus logo.

Many British retailers that have attempted to build an international business have failed. Tesco has responded to the need to be sensitive to local expectations in foreign countries by entering into joint ventures with local partners, such as Samsung Group in South Korea (Samsung-Tesco Home Plus), and Charoen Pokphand in Thailand (Tesco Lotus), appointing a very high proportion of local personnel to management positions.

In late 2004 the amount of floorspace Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK. Tesco regularly makes small acquistions to expand its international businesses. For example in its 2005/06 financial year it made one in Korea, one in Poland and one in Japan. [4]

Image:Tesco eger hungary.jpg
Tesco Hypermarket, Eger, Hungary

In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions. Tesco is the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%.<ref> "Tesco still commanding highest market share", RTE Business, December 6, 2006.</ref> On their Irish website, they also claim to be the largest purchaser of Irish food with an estimated €1.5 billion annually.<ref> "About Tesco Ireland", Tesco Ireland.</ref>

[edit] United States

On 9 February 2006 Tesco announced that it plans to move into the United States by opening a chain of convenience stores on the West Coast (Arizona, California and Nevada) in 2007.<ref> Template:Cite web</ref> The initial planned capital expenditure is up to £250 ($436m) million per year. CEO Terry Leahy stated, "We have committed serious resources to developing a format that we believe will be really popular with American consumers". Investors responded with some scepticism to the project, with a small fall in the company's share price on the day of the announcement.<ref> "Tesco plans foray into US market", BBC, February 9, 2006.</ref> In May 2006 the Los Angeles Times reported that Tesco had purchased a 130 000 m² (1.4-million-square-foot) distribution center in Riverside County, California, near Los Angeles, and planned to acquire another in Phoenix, Arizona. The stores are expected to be around 1400 m² (15,000 square feet) - good sized supermarkets in many countries, but a rather odd segment in the U.S. market.<ref>Britain's Tesco to Open Its First U.S. Stores in Southland, Los Angeles Times 20 May, 2006. [5] </ref>

Tesco’s US research did not stop at just shopping with consumers. In east Santa Monica, away from the beaches and tourists, Tesco constructed a dummy store within a warehouse. “Knock down the walls of the warehouse and it could be a standalone fully functioning store,” said a Tesco insider.

Such is the secrecy surrounding Tesco’s US plans that when it first built the store it pretended to be making a film set.

More than 200 focus groups have toured the store, providing feedback. “From what I hear, the ready meals are to-die-for. And Californians are wealthy and busy enough to try them all out,” said a member of the Santa Monica Chamber of Commerce. [6]

Tesco has announced that it has taken a lease on a 3000 m² (32,500 square foot) former Albertsons store in Glassell Park (Los Angeles), suggesting that the company might be planning stores twice as large as previously thought. However, analysts noted that Tesco could divide the Glassell Park site or bring in a concession so that it would be left with a store in line with its plans for a convenience chain.

"It is a strategy of developing local scale. They want to build enough market share to matter," said Darrell Rigby, who heads the global retail practice of consultant Bain & Co. in Boston. "The biggest question for competitors is how many Tesco formats will show up here," Rigby said. The size of the Glassell Park lease indicates that the British retailer most likely has a multifaceted approach to capturing a slice of the U.S. market, Rigby said.

Both Albertsons Inc. and Kroger Co.'s Ralphs chain have closed supermarkets in the Glassell Park neighborhood, leaving the community with one independent grocer and a smattering of small convenience stores. "This has forced us to shop outside of our local area," said George Brauckman, president of the Glassell Park Improvement Assn. If Tesco "is clean and has fresh food and produce, it will do very well," Brauckman said. "People will like the idea that Glassell Park is the location for this new venture."

[edit] Non-UK store summary

The following table shows the number of stores, total store size in area and sales for Tesco's international operations. The store numbers and floor area figures are as at 25 February 2006 but the turnover figures are for the year ended 31 December 2005, except for the Republic of Ireland data, which is at 25 February 2006, like the UK figures. This information is taken from the 2006 final broker pack.

Country Entered Stores Area (m²) Area (sq ft) Turnover (£ million)
China 2004 39 325,600 3,505,000 Note 1
Czech Republic 1996 35 239,200 2,575,000 473
France 1992 1 1,400 16,000 Note 2
Hungary 1994 87 304,900 3,282,000 1,088
Republic of Ireland 1997 91 198,800 2,140,000 1,546
Japan 2003 111 35,800 385,000 300
Malaysia 2002 14 86,300 929,000 151
Poland 1995 105 443,900 4,778,000 917
Slovakia 1996 42 212,700 2,289,000 393
South Korea 1999 62 383,600 4,129,000 2,132
Taiwan Note 3 6 45,000 484,000 134
Thailand 1998 219 628,800 6,768,000 1,087
Turkey 2003 8 57,900 623,000 182

Note 1: The business in China is a joint venture and its turnover is not reported in Tesco's 2006 brokers' pack.

Note 2: Tesco owned a French chain called Catteau between 1992 and 1997. Its existing single store in France is a wine warehouse in Calais, which opened in 1995 and is targeted at British day trippers. Wine is much cheaper in France than in the UK because the duty is far lower. Turnover is not reported separately.

Note 3: In Sept 2005 Tesco announced an asset-swap deal with Carrefour. Since the year end the six Taiwanese stores have been swapped for 11 hypermarkets in the Czech Republic and four stores in Slovakia.

Note 4:Tesco Stores (Malaysia) Sdn Bhd was incepted on 29 Nov 2001, as a strategic alliance with local conglomerate, Sime Darby Berhad of which the latter holds 30% of total shares.

[edit] Financial performance

Tesco is listed on the London Stock Exchange under the symbol TSCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC.

All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to the 26 February 2006 period end the numbers include non-UK and Ireland results for the calendar year ended on 31 December in the accounting year. For the 25 February 2006 period end the non-UK and Ireland accounting date was brought into line with the UK and Ireland. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative. Including 60 weeks of non-UK and Ireland sales the figures to 25 February 2006 were: revenue £39,454 million; profit before tax £2,235 million; profit for year £1,576 million; basic earnings per share 20.07 pence.

Group revenue for the 26 weeks to 26 August 2006 was £20,735 million, compared to £17,170 million in the 24 week interin period reported in 2005. On a comparable 26 week basis group sales increased by 12.7% and group profit increased by 10.3%.<ref>Tesco Plc Interim Results 2006/07, pages 2 and 14</ref>

52/3 weeks ended Turnover (£m) Profit before tax (£m) Profit for year (£m) Basic earnings per share (p)
25 February 2006 38,300 2,210 1,858 19.70
26 February 2005 33,974 1,962 1,366 17.44
28 February 2004 30,814 1,600 1,100 15.05
22 February 2003 26,337 1,361 946 13.54
23 February 2002 23,653 1,201 830 12.05
24 February 2001 20,988 1,054 767 11.29
26 February 2000 18,796 933 674 10.07
27 February 1999 17,158 842 606 9.14
28 February 1998 16,452 760 532 8.12

As of its 2006 year end Tesco was the fourth largest retailer in the world. The three largest are Wal-Mart, Carrefour and Home Depot. METRO was only just behind and might move ahead again if the euro strengthens against the pound, but METRO's sales include many billions of wholesale turnover, and its retail turnover is much less than Tesco's.

At 25 February 2006 Tesco operated 1,897 stores in the UK (2.395 million m², 25.9 million square feet) and 814 outside the UK (3.02 million m², 32.8 million square feet). Tesco's market capitalisation on 31 December 2005 was £26.035 billion ($44.8 billion), which was the largest of any retailer based outside the United States.

[edit] Controversy

Image:Tescopolywithcheese logo.png
Friends Of The Earth campaign logo, in their bid to highlight their claim of a Tesco monopoly

Tesco is increasingly a target for people in the UK who disapprove of the effects supermarket chains can have on farmers, suppliers and smaller competitors:

  • The group has been criticised for its tactics, including allegedly misleading consumers with a "phoney" price cut<ref>"Revealed: the secret of Tesco’s ‘phoney’ price war", Sunday Times, September 19, 2004.</ref> However, while individual cases can be cited, Tesco — along with the other major supermarkets — is experiencing price deflation.
  • Tesco's 2004 Adminstore acquisition led to local and national protests.<ref>Template:Cite web</ref> Tesco's other store openings and expansions are sometimes contested by campaign groups. These campaigns have not hindered Tesco's expansion programme very much.
  • Another point of controversy is the recent expansion of Tesco into the convenience store market. When a company controls more than 25% of a business sector in the UK, it is usually blocked from buying other companies in that sector (but not from increasing its market share through organic growth). The Office of Fair Trading currently treats supermarkets and convenience stores as two distinct sectors — although this definition has been challenged by smaller retailers, including the Association of Convenience Stores.<ref>Template:Cite web</ref>
  • In Thailand a controversy arose when the Royal Thai Police alleged that Thai soldiers operating as Tesco security intimidated a rural boy into poisoning chocolates as revenge for having their contracts revoked by the company.<ref>Template:Cite web</ref>
  • Tesco is also censured by those who think that it infringes upon the interests of farmers and smaller suppliers. The company responds by claiming that it follows industry-best practice and sources locally where it can to meet customer demand. In March 2005 the Office of Fair Trading published an audit of the workings of its code of practice on relationships between supermarkets and their suppliers. It reported that no official complaints had been received against Tesco or any of the other major supermarkets, but the supermarkets' critics, including Friends of the Earth, contested that suppliers were prevented from complaining by fear of losing business, and called for more rigorous supervision of the supermarkets. A further report by the Office of Fair Trading in August 2005 concluded that the aims of the Code of Practice were being met.<ref>Template:Cite web</ref>
  • In May 2004, Tesco announced it was reducing sick pay in an attempt to reduce levels of unplanned absence, which led to concerns over employees continuing to work despite poor health (faced with a reduced income otherwise).<ref>Sarah Ryle. "Tesco axes sick pay to reduce 'days off' cheats", The Guardian, May 16, 2004.</ref>
  • In January 2005, Tesco faced criticism for their testing of RFID tags used to collect information on product movement in pilot stores. Critics label the tags "Spy Chips" and allege that they are to be used to collect information on customers' shopping habits.<ref>Bill Wilson. "Big Brother at the supermarket till?", BBC News, January 27, 2005.</ref>
  • In December 2005, a committee of UK MPs produced a report accusing Tesco of "riding roughshod over planning rules".<ref>Susie Mesure. "Tesco 'riding roughshod' over planning rules, MPs are told", The Independent, December 8, 2005.</ref> The accusation stemmed from the company's building of a store in Stockport that was 20% larger than the company actually had permission to build. In September 2006, subsequent (retrospective) planning permission was requested by Tesco but refused.<ref>"Tesco planning permission refused", BBC, September 13, 2006.</ref>
  • In March 2006 the Office of Fair Trading (OFT) proposed to refer the UK grocery market to the Competition Commission for a new inquiry and called for the Commission to be thorough but swift in its investigation.<ref>Template:Cite web</ref>
  • The stores' signage displays non-standard grammar. Each store advertises (among other items) "mens magazines", "girls toys", "kids books", "womens shoes" and "Chart DVD's". The author Bill Bryson lambasts Tesco for apostrophe misuse in his book Troublesome Words, stating, "The mistake is inexcusable and those who make it are linguistic Neanderthals." In August 2006 Tesco released a television advertising campaign to persuade people to use fewer non-recyclable plastic carrier bags, which included the non-standard grammar "use less bags" (see grammar article).
  • In September 2006, Tesco came to an agreement with Tyrrells Crisps to stop selling grey market supplies. Tyrrells was started by potato farmer Will Chase after big supermarkets power of purchasing almost put his farm out of business. He started Tyrrells to gain greater margin by selling directly, and only sold through delicatessans and Waitrose supermarket. After Tesco bought supplies from the grey market, Chase took legal action and Tesco subsequently backed down.<ref>Template:Cite web</ref>
  • In November 2006, in Hungary a book was published anonymously sharing many details on smaller and larger offences the employees on all levels of employment (from cashiers to high ranked officials) make against the company, and also dubious methods stores supposedly use to mislead customers (these are already spread among the public, and the company was already fined on several occasions). The biggest case listed in the book is hijacking a van from the parking lots with about $500.000 worth of electronics, an event suspectedly conducted by employees.

[edit] See also

[edit] References

<references />

  • Clive Humby, Terry Hunt and Tim Phillips - Scoring Points: How Tesco Is Winning Customer Loyalty (2003) ISBN 0-7494-3578-X

[edit] External links

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