Tesco is the UK's leading supermarket chain and narrowly overtook Carrefour in 2013 to become the world's #2 retailer, though performance since then has been dented significantly by a brutal price war in the UK and sliding sales in several other key markets. The original platform for Tesco's growth was established in the 1970s and 1980s when former managing director Ian MacLaurin fought a long and drawn-out battle with the store's founding family to drag the brand upmarket, before overseeing a range of innovative schemes during the 1990s, not least the Tesco Clubcard loyalty and reward scheme and a financial services division. It leapfrogged domestic arch-rival Sainsbury's in 1995 to become Britain's biggest food retailer, and continued to steadily extend its lead while also broadening its footprint considerably with an aggressive move into non-food merchandise. After that, the group began looking mainly to the international market for further expansion. Most of its non-UK operations are now concentrated in Central Europe, with a small remaining foothold in Asia; a bold attempt to break into the US market in 2007 ended in failure five years later, and that setback was followed by a series of reverses in other markets, including the UK, leading to a change of CEO at the end of 2014. New chief Dave Lewis, hired from Unilever, cut loose distracting sidelines and less profitable international operations, and successfully led a back-to-basics renovation of the UK business. In 2017, Tesco acquired wholesale giant Booker, one of the key suppliers to not only its own retail estate but also its rivals. The following year, the group took steps to meet discounters Aldi and Lidl head-on with its own low-cost chain, Jack's, though so far that strategy has yet to prove its value. In 2015, the group explored the sale of inhouse marketing and analytics specialist Dunnhumby, which manages its Clubcard scheme, and also works for other retailers. In the end, though, it kept hold of the business. Group revenues for the year to Mar 2019 were £63.9bn, with net profit of £1.3bn. The UK & Ireland together accounted for over 80% of revenues and two-thirds of operating profit. At Tesco's peak in 2011, it had over 31% of the local grocery sector. That figure had fallen to 27% by 2019, but the chain retains a 12-percentage-point lead over nearest rival Sainsbury's from a network of almost 3,800 stores. There are another 900 stores in Poland, the Czech Republic, Hungary and Slovakia, and 2,040 in Asia, mainly in Thailand. In 2019, CEO Dave Lewis took investors by surprise with a plan to step down in summer 2020; his successor will be Ken Murphy.
Capsule checked 30th October 2019
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Historical profile information for Tesco
Adbrands Daily Update 9th Dec 2019: Tesco is considering an exit from its operations in Asia following an approach from an unnamed buyer. In a short statement the group said it was examining strategic options including a possible sale, but warned that it was possible no deal would be agreed. Tesco has already divested several of its international subsidiaries, but retains operations in Central Europe as well as in Thailand and Malaysia. Thailand is the biggest of the Asian businesses, comprising 2,000 stores and hypermarkets, with a combined value of as much as $7bn. Tesco Malaysia has 74 stores, and is valued at up to $2bn.
Adbrands Daily Update 2nd Oct 2019: Tesco CEO Dave Lewis took investors and employees by surprise with the announcement that he will step down next summer after five years with the supermarket group. "I believe that the tenure of the CEO should be a finite one," he said in a prepared statement, "and that now is the right time to pass the baton. Our turnaround is complete, we have delivered all the metrics we set for ourselves." Separately, Lewis told the Financial Times that he needs to "recharge the batteries". He said the retail environment is "all consuming. The business never sleeps. It is 365 days, 24/7 - the operational intensity is very high." His successor has already been selected: Walgreens Boots Alliance's former chief commercial officer Ken Murphy.
Adbrands Daily Update 10th Apr 2019: Tesco reported solid performance for the year to Feb, helped significantly by the addition of wholesaler Booker. Revenues rose by 11% to £63.9bn, while preatx profits jumped 29% to almost £1.7bn. In the UK, Tesco's like-for-like sales were up by a little under 2%, but Booker jumped 11%. There were single-digit declines for group operations in Europe and Asia. "After four years we have met or are about to meet the vast majority of our turnaround goals," said CEO Dave Lewis. "I'm delighted with the broad-based improvement across the business. We have restored our competitiveness for customers and rebuilt a sustainable base of profitability."
Adbrands Daily Update 28th Jan 2019: Tesco announced cuts of up to 9,000 jobs across its UK store network as part of a drive to save costs. That followed leaked media reports that the company was planning to remove fresh meat, fish and deli counters in larger stores and also scale back in-store bakeries. Tesco responded with confirmation that fresh food counters would be shut in around 90 stores, but that another 700 would retain "either a full or flexible counter offer for our customers". It said there would be no change to bakeries and that "up to half" of the 9,000 staff affected would be transferred to other customer-facing roles. Industry bible The Grocer described Tesco's decision as "ruthless but right for the business". Fresh counters contribute only minimal turnover. "Industry sources say they create food waste and it is understood many of them have been haemorrhaging money for years."
Adbrands Daily Update 14th Jan 2019: Discounters Aldi and Lidl suffered unexpected reverses in the UK over the peak Christmas shopping period. Despite a big promotional push, both stores saw their market share slip back slightly from the highs they had been enjoying for the previous few months. According to Kantar Worldpanel figures, Aldi slipped from its record high of 7.6% to 7.4% for the 12 weeks to 30th Dec, while Lidl fell back to 5.4% from its own best-ever 5.6%. Small differences to be sure, but significant nonetheless. Their loss appears to have been the the big four's gain. Tesco and Sainsbury in particular notched up their best performance since Feb 2018 with 27.8% and 16.2% respectively. In a year-on-year comparison, however, Aldi and Lidl were both higher, and Tesco and Sainsbury's lower, than in Dec 2017.
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