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2. About Tesco PLC

Non Executive Chairman; David Read

Chief Executive; Sir Terence Leahy

For fiscal year 2008 Tesco’s total sales were approximately £51,770 million, and non-food sales were 23% of the total at £11,800 million; an increase of 12% compared with 2007[i]. Group pre-tax profit was £2,803 million for 2008, compared with £2,653 million for 2007; a 5.7% increase. Export sales contributed £700 million which their report says is a similar amount for total group sales 10 years ago!

Return on Capital Employed (R.O.C.E.); 12.9% [ii].

Net Cash Flow; £3,343 million: Net Debt £6,200 million [iii]

Tesco has 2,115 stores in the UK with 280,373 employees, 746 stores with 83,705 employees in Ireland and central Europe, 53 stores with 669 employees in the USA and 814 stores in Asia with 77,544 employees, in total 3,728 stores and over 440,000 employees world-wide[iv].

Their USA operations began during November 2008, and they have 11 stores in Nevada, 28 in southern California and 14 in Arizona, which has to be considered as very good progress in less than one year’s operation[v].

In line with many supermarket groups, they also offer online shopping which seems to be growing in popularity and Tesco’s increased by 30% during fiscal 2008.

Listed on the FTSE Stock Exchange

They claim to be the third largest grocery retailer in the world!

3. Tesco’s Current & Potential Strategy

Their strategy is to continue to expand their non-food products to achieve the same level of sales as their food products, and increasing the number of overseas stores will support this strategy, and the management sees this as a way of continuing their progressive growth[vi].

The future strategy is also to maintain food products as a core business alongside further moves into non-food products, particularly as food will continue to be their core business in the UK. Non-food sales include; financial services, fuel retailing, clothing, telecom services viz. mobile phones and broadband services, electrical goods and furniture. According to the Chairman’s report they moved into financial services 10 years ago. Read, D 2008 ‘A successful year’; Annual Review and Summary Financial Statement 2008 (Page 5).

Economical Issues – in order to maintain their market share they reduced food prices during 2008 to combat the recessionary pressure in the UK caused by the ‘Credit Crunch’ effects which reduced trading levels, and including the impact from competitor’s recovery plans. Additional efforts and plans were also introduced to reduce staff absenteeism which they claim achieved a 5.5% reduction in absenteeism in stores and 10.3% in depots, filling over 121,000 more shifts and 31,200 more shifts respectively in stores and depots, which provide very good operational benefit.[vii]

Environmental Issues – Tesco only sells energy-efficient light bulbs in their stores. They do not use Styrofoam in their packaging, and supply re-usable plastic bags and canvas bags to their customers. They recently introduced ‘Fresh & Easy’ as a pilot member of the leadership in energy and environmental design (LEED) volume certification programme. This is a third-party programme and is the accepted benchmark for the design, construction and operation of high performance green buildings. This project seems to have started with their recently introduced American sites. To create and support a scheme as described above, clearly require a great deal of finance which Tesco has had to provide.