| Type | Public limited company |
|---|---|
| Traded as | LSE: TSCO |
| Industry | Retailing |
| Founded | 1919 (East London) |
| Founder(s) | Jack Cohen |
| Headquarters | Cheshunt, Broxbourne, Hertfordshire, England, United Kingdom |
| Number of locations | 5,381 stores (As at Feb 2010) (see table below) |
| Key people |
|
| Products | Groceries, consumer goods, financial services, telecoms |
| Revenue | £60.93 billion (2010/11)[1] |
| Operating income | £3.81 billion (2010/11)[1] |
| Net income | £2.67 billion (2010/11)[1] |
| Employees | 472,000 (2010)[2] |
| Subsidiaries | Tesco Stores Ltd. |
| Website | www.tesco.com |
Tesco plc (LSE: TSCO) is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom.[3] It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart).[4][5] It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand.[6][7][8]
The company was founded in 1919 by Sir Jack Cohen as a group of market stalls. The Tesco name first appeared in 1924, after Cohen purchased a shipment of tea from T. E. Stockwell and combined those initials with the first two letters of his surname,[9] and the first Tesco store opened in 1929 in Burnt Oak, Middlesex. The business expanded rapidly, and by 1939 there were over 100 Tesco stores across the country.[10] Originally a UK-focused grocery retailer, since the early 1990s Tesco has increasingly diversified geographically and into areas such as the retailing of books, clothing, electronics, furniture, petrol and software; financial services; telecoms and internet services; DVD rental; and music downloads.[11]
Tesco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £31.3 billion as of 23 December 2011, making it the 14th-largest company on the London Stock Exchange.[12]
Jack Cohen founded Tesco in 1919 when he began to sell surplus groceries from a stall at Well Street Market, Hackney, in the East End of London.[13] The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from T. E. Stockwell. He made new labels using the first three letters of the supplier's name (TES), and the first two letters of his surname (CO), forming the word TESCO.[9] The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited.[13] The first self-service store opened in St Albans in 1956 (which remained operational until 2010, with a period as a Tesco Metro),[14] and the first supermarket in Maldon in 1956.[13]
During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. The company purchased 70 Williamson's stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960, beating Express Dairies Premier Supermarkets to the deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).[15]
Originally specialising in food and drink, it has diversified into areas such as clothing, electronics, financial services, telecoms, home, health, car, dental and pet insurance, retailing and renting DVDs,[11] CDs, music downloads, Internet services and software.
Jack Cohen's business motto was "pile it high and sell it cheap",[16] to which he added an internal motto of "YCDBSOYA" (You Can't Do Business Sitting On Your Arse) which he used to motivate his sales force.[16][17]
In May 1987 Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the North of England for £220 million.[18]
In 1994, the company took over the supermarket chain William Low, successfully fighting off Sainsbury's for control of the Dundee-based firm, which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England. In 2006 Inverness was branded as "Tescotown",[19][20] because well over 50p in every £1 spent on food is believed to be spent in its three Tesco stores.[21]
Tesco introduced a loyalty card, branded 'Clubcard', in 1995 and later an Internet shopping service. As of November 2006 Tesco was the only food retailer to make online shopping profitable.[22] In 1996 the typeface of the logo was changed to the current version with stripe reflections underneath, whilst the corporate font used for store signage was changed from the familiar "typewriter" font that had been used since the 1970s. Terry Leahy assumed the role of Chief Executive on 21 February 1997, the appointment having been announced on 21 November 1995.[23][24]
On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods, which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Republic of Ireland and Northern Ireland, plus associated businesses, for £640 million.[25] The deal was approved by the European Commission on 6 May 1997.[26] This acquisition gave it both a major presence in (and marked a return to) the Republic of Ireland and a larger presence in Northern Ireland than Sainsbury's, which had begun its move into Northern Ireland in 1995.
In 1997 Tesco and Esso (part of Exxonmobil) forged a business alliance that included several petrol filling stations on lease from Esso, with Tesco operating the attached stores under the Express format. In turn Esso operates the forecourts and sells their fuel via the Tesco store. 200 Tesco/Esso stores now exist across the UK.
The company was the subject of a letter bomb campaign lasting five months from August 2000 to February 2001 as a bomber calling himself "Sally" sent letter bombs to Tesco customers and demanded Clubcards modified to withdraw money from cash machines.[27]
In July 2001 Tesco became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks.[28] In 2002 Tesco purchased 13 HIT hypermarkets in Poland. It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillons and Day & Nite chains in the UK.[29]
In October 2003 the company launched a UK telecoms division, comprising mobile and home phone services, to complement its existing Internet service provider business. In June 2003 Tesco purchased the C Two-Network in Japan.[30] It also acquired a majority stake in Turkish supermarket chain Kipa.[31] In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London.[32] In August 2004, it also launched a broadband service. In Thailand Tesco Lotus was a joint venture of the Charoen Pokphand Group and Tesco, but facing criticism over the growth of hypermarkets CP Group sold its Tesco Lotus shares in 2003. In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.[33] In mid 2006 Tesco purchased an 80% stake in Casino's Leader Price supermarkets in Poland. They will be rebranded into small Tesco stores.[34] In 2003, Tesco took part in a joint venture with O2 to form the Tesco Mobile mobile virtual network operator.
In 2007 Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007 Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis. They were fined a total of £116 million. Tesco, which maintains that it was not a part of the cartel, is still under investigation by the OFT.
Although profits were £1.9 billion for the first half of 2011, sales figures were the worst in 20 years due to shoppers switching to budget rivals.[35]
According to Citigroup retail analyst David McCarthy, "[Tesco has] pulled off a trick that I'm not aware of any other retailer achieving. That is to appeal to all segments of the market".[36] One plank of this strategy has been Tesco's use of its own-brand products,[37] including the upmarket "Finest", mid-range Tesco brand and low-price "Value" encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.
Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase "The Tesco Way" to describe the company's core purposes, values, principles, and goals[38] This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy's leadership, implying a shift by the company to focus on people, both customers and employees.[39]
A core part of the Tesco expansion strategy[40] has been its innovative use of technology.[41] It was one of the first to build self-service tills and use cameras to reduce queues.[42]
To protect its brand image, and given its expansion plans in Thailand, Tesco has recently been employing a policy of launching defamation proceedings. In November 2007, Tesco sued a Thai academic and a former minister for civil libel and criminal defamation. Tesco is insisting that the two pay £1.6 million and £16.4 million plus two years' imprisonment respectively. They have been alleged to have misstated that Tesco's Thai market amounts to 37% of its global revenues, amongst criticism of Tesco's propensity to put small retailers out of business.[43]
Tesco's main advertising slogan is "Every little helps". Its advertisements in print and on television mainly consist of product shots (or an appropriate image, such as a car when advertising petrol) against a white background, with a price or appropriate text (e.g., "Tesco Value") superimposed on a red circle. On television, voiceovers are provided by recognisable actors and presenters, such as Barbara Windsor, James Nesbitt, Jane Horrocks, Terry Wogan, Dawn French, Ray Winstone, Neil Morrissey, Martin Clunes, David Jason, David Tennant and Kathy Burke amongst others.
Tesco has made a commitment to corporate social responsibility in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organisations.[44] This compares favourably with Marks & Spencer's 1.51% but not well with Sainsbury's 7.02%.[45] Will Hutton, in his role as chief executive of The Work Foundation recently praised Tesco for leading the debate on corporate responsibility.[46] However Intelligent Giving has criticised the company for directing all "staff giving" support to the company's Charity of the Year.[47]
In 1992, Tesco started a "computers for schools scheme", offering computers in return for schools and hospitals getting vouchers from people who shopped at Tesco. Until 2004, £92 million of equipment went to these organisations. The scheme has been also implemented in Poland.[48]
Starting during the 2005–06 football season, the company now sponsors the Tesco Cup, a football competition for young players throughout the UK.
In 2009 Tesco used the phrase, “Change for Good” as advertising, which is trade marked by Unicef for charity usage but not for commercial or retail use, which prompted the agency to say, "It is the first time in Unicef’s history that a commercial entity has purposely set out to capitalise on one of our campaigns and subsequently damage an income stream which several of our programmes for children are dependent on.” They went on to call on the public “...who have children’s welfare at heart, to consider carefully who they support when making consumer choices.”[49][50] Tesco's own labels for personal care and household products are moreover cruelty free - this means, they are not tested on animals - http://www.gocrueltyfree.org
In June 2011, Tesco announced that it was working with 2degrees Network to create an online hub as part of its target to reduce its supply chain carbon footprint by 30% by 2020.[51]
In September 2011 a Greenpeace report revealed that Tesco supermarkets in China were selling vegetables that contained illegal pesticides or at levels exceeding the legal limit. A green vegetable sample from Tesco turned up methamidophos and monocrotophos, the use of which has been prohibited in China since the beginning of year 2007. [52]
Tesco have used many Television adverts over the years. In July 2007 a DVD containing adverts from 1977–2007 was given to all members of staff. Early advertising stressed cheap prices and how to keep "The cost of living in check." In 1977 an advert was made where a till showed the prices to many items such as "baked beans 121/2p".
Tesco's most famous advert was "Checkout 82," which was made in 1982, where a till would have a receipt coming out of it with the prices on. This advert had synth pop music as the backing and people singing "Check it out, check it out".
Adverts in the late 90s had Prunella Scales as Dotty Turnbull, arguing about Tesco prices. In 2003, adverts showed items and shopping trolleys talking about Tesco. Late 2000s adverts have included many celebrities and celebrity voice-overs such as The Spice Girls and the voice of actors James Nesbitt and Jane Horrocks.[53]
Tesco's UK stores are divided into six formats, differentiated by size and the range of products sold. These are shown below:
Tesco Extra stores are larger, mainly out-of-town hypermarkets that stock nearly all of Tesco's product ranges. Exceptions include Trowbridge, Stafford, Hexham, Kingston upon Hull, Stevenage, Chesterfield, Clay Cross, Alfreton, Leigh, Wigan, Grimsby, Bulwell, Galashiels, Slough, Bradford, Eastbourne, Yeovil, Cradley Heath, Nottingham Beeston Burnley, and Leyland, which are in the heart of town centres. Cardiff (Western Avenue) and Cardiff (Pengam Green), Warrington and Walsall College are located in inner-city locations. The first Extra opened in 1997 in Pitsea. The 100th store opened on 29 November 2004 in Stafford. The number of these is now being increased by about 20 a year, mainly by conversions from the second category.
The largest store in England by floor space is Tesco Extra in Walkden, with 185,500 square feet (17,230 m2) of floorspace.[54] In 2011, a Tesco Extra will be constructed in St.Helens adjacent to the new St.Helens RLFC Stadium. The largest in Scotland is the Silverburn store. The largest in Wales is at Parc Fforestfach, Swansea, which is 112,000 square feet (10,400 m2) constructed in 2003. The 200th Extra store was opened in October 2010 in Bishop Auckland.
Other large stores include Bar Hill, Cleethorpes, Newcastle upon Tyne, Milton Keynes, Stockton-on-Tees and Watford, which are all in the 120,000 square feet (11,000 m2) range. Newer stores are usually on two floors, with the ground floor mainly for food and the first floor for clothing, electronics and entertainment. Some stores that did not have the second floor have been converted to this format in recent years. Most Tesco Extra stores have a café and as of October 2009, all stores have a Tesco Tech Support Team.
Tesco superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than Extra stores. The stores have always previously been branded as simply 'Tesco', but a new store in Liverpool was the first to use the format brand 'Tesco Superstore' above the door.[55]
Tesco Metro stores are sized between Tesco superstores and Tesco Express stores, with stores averaging 11,000 square feet (1,000 m2). They are mainly located in city centres, the inner city and on the high streets of towns. The first Tesco Metro opened in Neston in 1980. Since then all Tesco branches with a high street format, including those that opened before the Covent Garden branch, have been rebranded from Tesco to Tesco Metro. 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 stores averaging 2,200 square feet (200 m2), stocking mainly food with an emphasis on higher-margin products (due to small store size, and the necessity to maximise revenue per square foot) alongside everyday essentials. They are found in busy city centre districts, small shopping precincts in residential areas, small towns and villages and on Esso petrol station forecourts. The 1000th Tesco Express site opened in July 2009. Tesco have now started building Tesco Express stores with only 'Assisted-Service' tills, in which the customer scans all their own shopping and packs it, with the support of supervising staff when required.
One Stop, which includes some of the smallest stores (smaller than a Tesco Express), is the only Tesco store format in the UK that does not include the word Tesco in its name. The brand, along with the original stores, formed part of the T&S Stores business but, unlike many that were converted to Tesco Express, these kept their old name. Subsequently, other stores bought by Tesco have been converted to the One Stop brand. Some have Tesco Personal Finance branded cash machines.
The business has attracted some controversy, as grocery prices in these shops, often situated in less well-off areas, can be higher than nearby Tesco branded stores, highlighted in The Times 22 March 2010: "Britain’s biggest supermarket uses its chain of 520 One Stop convenience stores—which many customers do not realise it owns—to charge up to 14 per cent more for goods than it does in Tesco-branded stores."
Tesco responded to the article stating "It is a separate business within the Tesco Group, with its own supply chain and distribution network. One Stop stores offer a different range to Express stores and its operating costs are different. One Stop’s price strategy is to match its nearest competitor Cost Cutter and is frequently cheaper."[56] They can usually be found in smaller communities across the United Kingdom.
Tesco Homeplus is not Tesco's first non-food only venture in the UK. Until the late 1990s/early 2000s there were several non-food Tesco stores around the country including Scarborough and Yate. Although not in a warehouse style format, the stores were located on high streets and shopping centres, they did stock similar items to Homeplus stores. In both cases this was because another part of the shopping centre had a Tesco Superstore that stocked food items only.
In May 2005 Tesco announced a trial non-food only format near Manchester and Aberdeen,[57] and the first store opened in October 2005:
A further five stores opened before it stopped being a trial, and there is now a plan to open many more stores.
Stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. Tesco is using 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.
There are currently 13 Homeplus stores nationwide. The newest Homeplus store opened in Chester in July 2009.
Two more were due to open in the first half of 2009 at sites around the country. All of these were to feature the Order and Collect desk where customers can purchase and collect most items straightaway.
As of 26 February 2011, at the end of its 2010/11 financial year, Tesco's UK store portfolio was as follows.[1]
| Format | Number | Total area (m²) |
Total area (sq ft) |
Mean area (m²) |
Mean area (sq ft) |
Percentage of space |
+/- Stores 2010/11 |
|---|---|---|---|---|---|---|---|
| Tesco Extra | 212 | 1,400,885 | 15,079,000 | 6,608 | 71,127 | 41.08% | 22 |
| Tesco Superstores | 470 | 1,297,112 | 13,962,000 | 2,760 | 29,706 | 38.04% | 15 |
| Tesco Metro | 186 | 194,632 | 2,095,000 | 1,046 | 11,263 | 5.73% | 5 |
| Tesco Express | 1,285 | 272,392 | 2,932,000 | 212 | 2,282 | 7.99% | 155 |
| One Stop | 599 | 74,044 | 797,000 | 142 | 1,530 | 2.04% | 8 |
| Tesco Homeplus | 13 | 51,468 | 554,000 | 3,790 | 42,615 | 1.53% | 0 |
| Dobbies | 28 | 121,053 | 1,303,000 | 4,323 | 46,536 | 3.57% | 3 |
| Total | 2,715 | 3,411,586 | 36,722,000 | 1,257 | 13,526 | 100% | 208 |
Tesco announced its intention to purchase Dobbies Garden Centres for £155.6 million on 8 June 2007. Dobbies operates 28 garden centres, half in Scotland and half in England.[58] The deal was confirmed as successful by the board of directors of Tesco on 17 August 2007 when the board announced that they had received 53.1% of shares (or 5,410,457 shares), which confirmed conditions set out in the offer made on 20 June 2007. Although the deal had been confirmed by Tesco the offer remained open to Dobbies shareholders until 20 August 2007.[59] Tesco raised its holding to 65% in September[60] and on 5 June 2008[61] Tesco announced that it would be compulsorily acquiring Dobbies Garden Centres plc. Dobbies continues to trade under its own brand, from its own head office in Melville, near Edinburgh.
Tesco has a banking arm called Tesco Bank, formerly a 50:50 joint venture with the Royal Bank of Scotland. Products on offer include credit 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 £130 million for the 52 weeks to 24 February 2007, of which Tesco's share was £66 million. This move towards the financial sector diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.
On 28 July 2008 Tesco announced that they were buying out the Royal Bank of Scotland's 50% stake in the company for £950 million.[62][63] In October 2009 the name of Tesco Personal Finance was changed to Tesco Bank.
Technika is a brand name for Electronic products sold exclusively through Tesco Stores. The Technika range currently includes Televisions, MP3 Docking Stations, Computer Peripherals, DVD and Blu-ray Players, DAB Radios. The range is updated on a regular basis to follow market trends.
The Technika brand is managed in-house by Tesco alongside its other brands, such as Tesco and Tesco Value. Customer support is offered through the Tesco Electrical Helpline or in-store through Tesco Tech Support.
Tesco operates mobile phone, home phone and broadband businesses. These are available to residential consumers in several countries and are sold via the Tesco website and through Tesco stores. Tesco has not purchased or built a telecoms network, but instead has pursued a strategy of pairing its marketing strength with the expertise of existing telecoms operators.
In autumn 2003, Tesco Mobile was launched as a joint venture with O2. In November 2009 Tesco announced over 2 million UK customers are using this service. A similar O2 based service has since been launched in Ireland and Slovakia.
In August 2004 Tesco broadband, an ADSL-based service delivered via BT phone lines, was launched in partnership with NTL. In November 2009 Tesco announced a new partnership with Cable & Wireless, and a fresh focus on this business area.
In January 2006, Tesco Internet Phone, a Voice over Internet Protocol, VoIP, service was launched in conjunction with Freshtel of Australia. This service was shut down in 2010.
In November 2009 Tesco announced it now has 100 Phone Shops embedded within larger Tesco Extra stores, and stated an intention to open up to 500 such shops across the UK in the medium term. In April 2010 the first Tesco Phone shop opened in Slovakia.
Tesco first started selling petrol in 1974. Tesco sells 95, 97 and 99 RON (a fuel developed by Greenergy of which Tesco is a shareholder) petrol on a retail basis from forecourts at most superstore and Express locations. Tesco have recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel blends instead of pure petrol and diesel at their petrol stations, and now offering Greenergy 100% biodiesel at many stores in the southeast of the United Kingdom.
On 28 February 2007 motorists in South East England reported that their cars were breaking down. This was due to petrol sold by Tesco and others being contaminated with silicon,[64] Tesco has been criticised with claims that they had been alerted to the problem as early as 12 February 2007. On 6 March, Tesco offered to pay for any damage caused by the faulty petrol, after printing full page apologies in many national newspapers.[65]
Tesco acquired a small I.T. support company called The PC Guys in 2008, and were able to launch Tesco Tech Support in December of that year.[66] Teams of Advisors were put into all Extra stores with the sole job role of answering technical questions on Tesco's range of electrical products. They also are responsible for advising customers on extended warranties, electrical returns and a range of payment plans on all electrical goods over a certain amount. Through the Cardiff Customer Service Centre in the United Kingdom, Tesco Tech Support provides UK and Ireland with technical support via telephony system on the electrical products sold in their stores.
In 2010 Tesco started funding a small film studio intended to produce Tesco exclusive direct-to- films. The first film comes out on 6 September and is called Paris Connections. It is based on a popular novel by Jackie Collins, and is an investigation thriller. Jackie Collins rewrote the novel to be more appropriate to the medium of film.[67][68][69]
In 2010, Tesco announced that they will be forming their own record label, with notable signings since including Mick Hucknall and Nadine Coyle. Tesco records will be exclusive products to Tesco stores.
On 20 April 2011, Tesco acquired a 80% stake in Blinkbox from Eden Ventures and Nordic Venture Partners, it intends to use the company to boost its digital entertainment offering.[70]
In 2011, Tesco launched Tesco Gold Exchange, which is a postal gold service, offering money for gold, as well as offering clubcard points to customers via their website.[71]
In 2011, Tesco launched tesco-tyres.com in association with Blackcircles.com, offering a choice of over 1,200 fitting partners across the UK as well as offering clubcard points with purchases.
In February 2011, Tesco launched Your Beauty Salon, in Tesco stores planning to open 70 over the next year, offering services like haircuts, leg waxing, manicures and eyebrow.[72]
Customers can collect one Clubcard points for every £1 (or one point for €1 in Ireland and Slovakia) they spend in a Tesco store, or Tesco.com, and 1 point per £2 on fuel (not in Slovakia). Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or through Clubcard partners, E.ON and Avis. Each point equates to 1p in store when redeemed or up to 3 times their value when used with clubcard deals (offers for holidays, day trips, etc.) Clubcard points (UK & IE) can also be converted to Airmiles.
Tesco have recently annonced a partniship with Virgin Atlantic whereby you can convert clubcard points into frequent flyer miles [73]
Holders receive Clubcard statements 6 times a year, which often feature extra point coupons and money-off coupons. These can be spent in-store, online or on various Clubcard deals.
Tesco was cited in a Wall Street Journal article[74] as using the intelligence from the Clubcard to thwart Wal-Mart's initiatives in the UK.
Tesco operates a grocery homeshopping service, as well as providing consumer goods, telecommunications and financial services online.
In May 1984, in Gateshead, England, the world's first recorded online home shopper, Mrs Jane Snowball, purchased groceries from her local Tesco store in the world's first recorded online shopping transaction from the home.[75]
Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. Tesco.com was formally launched in 2000. It also has online operations in the Republic of Ireland and South Korea. Currently it's also considering entering Polish market. 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 Ocado. 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.
On 1 October 2007, 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.[76] As Formjet is exclusive distributor for Panda Software and Ability Plus Software, packages from these companies are likely to feature.
Tesco offers an internet-based DVD rental service, which is operated by LOVEFiLM and a music download service.
Tesco's international expansion strategy has responded to the need to be sensitive to local expectations in other 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. It also makes small acquisitions as part of its strategy for example, in its 2005/2006 financial year it made acquisitions in South Korea, one in Poland and one in Japan.[77]
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.
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.
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 27 February 2010. This information is taken from the 2009/10 financial broker packPDF (106 KB).
| Country | Entered | Stores | Area (m² (sq ft)) | Mean Store Area (m² (sq ft)) | +/- Stores 2010/11 |
|---|---|---|---|---|---|
| China | 2004 | 105 | 755,766 (8,135,000) | 7,198 (77,476) | 17 |
| Czech Republic | 1996 | 158 | 486,626 (5,238,000) | 3,080 (33,152) | 22 |
| Hungary | 1994 | 205 | 667,508 (7,185,000) | 3,256 (35,049) | 29 |
| Republic of Ireland | 1997 | 130 | 301,099 (3,241,000) | 2,316 (24,931) | 11 |
| Japan | 2003 | 140 | 46,916 (505,000) | 335 (3,607) | 2 |
| Malaysia | 2002 | 44 | 308,903 (3,325,000) | 8,129 (87,500) | 7 |
| Poland | 1992 | 371 | 756,788 (8,146,000) | 2,040 (21,957) | 35 |
| Slovakia | 1996 | 97 | 314,291 (3,383,000) | 3,240 (34,876) | 16 |
| South Korea | 1999 | 354 | 1,084,736 (11,676,000) | 3,064 (32,983) | 49 |
| Thailand | 1998 | 782 | 1,053,786 (11,342,000) | 1,348 (14,504) | 119 |
| Turkey | 2003 | 121 | 594,487 (6,399,000) | 4,913 (52,884) | 16 |
| United Kingdom (for comparison) | 1919 | 2,715 | 3,411,586 (36,722,000) | 1,257 (13,526) | 205 |
| United States | 2007 | 164 | 199,091 (2,143,000) | 1,214 (13,067) | 19 |
| Total (not including UK) | 2,666 | 6,569,997 (70,718,000) | Mean: 2,465 (26,536) | 336 | |
| Total (including UK) | 5,381 | 9,981,583 (107,440,000) | Mean: 1,855 (19,970) | 544 |
Tesco acquired a 50% stake in the Hymall chain, from Ting Hsin in September 2004. In December 2006 it raised its stake to 90% in a £180 million deal.[78] Most of Tesco China's stores are based around Shanghai, but according to Tesco it plans to equip the business to expand more quickly and in different areas. Tesco has a large store in Weifang, Shandong province. Tesco has been increasing its own brand products into the Chinese market as well as introducing the Tesco Express format.[79]
Tesco opened its first store in the Czech Republic in 1996 and now has over 84 stores, with further planned.[80] Tesco opened its first stores in the Czech Republic by buying US corporation Kmart's operations in the country and converting them into Tesco stores. Tesco is also keen to expand non-food items and has already opened petrol stations and offers personal finance services in the Czech Republic.[81] There are currently three Tesco Extra stores in the Czech Republic – one in Prague and two in Plzeň.
Tesco owned a French food retailer called Catteau between 1992 and 1997, which operated a chain of stores in NE France under the Cedico, Hyper Cedico and Cedimarche banners. Tesco also operated a "Vin Plus" outlet in Calais, selling wine, beer and spirits, which closed on 30 August 2010.[82]
Tesco launched in Hungary in 1994 after purchasing a small local supermarket group trading as S-Market and based in the North West of Hungary. It opened its first hypermarket in Hungary at the Polus Centre in Budapest in 1996. Tesco operates through more than 200 stores in Hungary with further openings planned.[80] Tesco offers its value, standard, healthy living and finest range in its stores. Tesco Hungary also offers a clothing line and personal finance services.[83] In August 2010 opened the first Tesco Extra in Budapest; its name is Tesco Extra Fogarasi and it is located in Zugló, Budapest.
Tesco operated in the Irish grocery market in the early eighties, however sold its operations there in March 1986.[84]
Tesco re-entered the Irish market in 1997 after the purchase of Power Supermarkets Ltd.
The country's newspaper of record the Irish Times in April 2011 said that "Increasingly, Ireland is being viewed as a provincial backwater by the parent company – albeit a very profitable little backwater – and all the strategic decisions are being taken in the UK.[85]
It now operates from 101 stores across Ireland. Like Tesco stores in the UK, these offer a home delivery shopping service available to 80% of the Irish population as well as petrol, mobile telephone, personal finance, flower delivery service and a weight-loss programme.[86] Also available is Tesco's loyalty programme, the Clubcard.
Tesco is now the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%.[87] Tesco Ireland also claims to be the largest purchaser of Irish food with an estimated €1.5 billion annually. Tesco Ireland operates a small number of Tesco Extra hypermarkets in the Republic of Ireland, with Clarehall Extra on the Malahide Road being the first to open in 2006. Tesco's largest hypermarket store in Europe, with a floorspace of 18,500 m², opened in Naas in Co Kildare in November 2010.[88]
Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing.[89] However, in 2008 Tesco announced their intention to invest an initial £60m ($115m) to open a wholesale cash-and-carry business based in Mumbai with the assistance of the Tata Group.[90]
Tesco opened a large purpose built store along with a car park in Douglas on the Isle of Man in 2002, There were plans to rebuild the store to almost double the floor space, including a mezzanine level and to replace the open car parking area with a two storey car park, However these plans fell through in 2010. Tesco also runs a home delivery service across the island. There are currently (as of 2011) plans to open a second store in Castletown, Isle of Man.
Tesco Japan first began operations in 2003. It was brought about by a buy-out of C Two stores for £139 million in July 2003 and later Fre'c in April 2004.[91] Tesco has adopted an approach that focuses on small corner shops that operate similarly to its Express format, rather than opening hypermarkets. It has also launched its range of software in Japan.[80] In August 2011, Tesco announced that they would be selling off their Japanese stores after revealing that only half of the stores in the Greater Tokyo Area were making a profit.[92]
Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 45 Tesco and Tesco Extra stores. Selangor has 12 stores, Perak seven stores, Johor six stores, Kuala Lumpur and Penang five stores each, Kedah four stores, Negeri Sembilan three stores, Melaka two stores, and Kelantan one store. Tesco has partnered with local conglomerate Sime Darby Berhad, which holds 30% of the shares.[93]
Tesco also acquired the Malaysian operation of the wholesaler Makro, which was rebranded Tesco Extra and provides products for local retailers. As of 2011, Tesco has relaunched the Tesco Extra brand in five of its stores in the Klang Valley. The new Tesco Extra brand will now offer the widest choice in the food, clothing, home and electronics ranges. A variety of complementary services such as a pharmacy, an optician and a Tesco phone shop will also be incorporated into these Tesco Extra stores.
Tesco Malaysia offers a value range, its own branded range, electronic goods, the loyalty clubcard and clothing. Tesco Malaysia's clubcard introduced Green ClubCard Points in 2007 making Tesco Malaysia the first Tesco international business to introduce the scheme (Green ClubCard Points).[94]
Tesco entered the Polish market in 1992. It currently operates from 334 stores.[80] Tesco Poland offers the value, healthy living and own branded line of products as well as regional produce, petrol, personal finance services and on-line photo processing. In August 2008 Tesco opened the first Extra store in Poland located in Częstochowa. Currently there are five Tesco Extra stores in Poland.
Tesco Slovakia opened in 1996 as part of Tesco's international expansion aims. It now operates from 97 stores and 16 service stations.[95] Tesco Slovakia has recently put great emphasis on organic products. However, Tesco Slovakia caused controversy amongst the Slovak government when it was found to have come foul of food safety laws in 2006.[96] In April 2010 the first Tesco Extra in Central Europe opened in Bratislava – Petrzalka, Slovakia as part of a pilot project for Tesco in the region, including the first self-service cash flow in Central Europe. There are currently four Tesco Extra stores in Slovakia – three in Bratislava and one in Zvolen.[97]
Tesco launched its South Korean operations in 1999 and partnered with Samsung, currently Tesco holds 94% of the shares in the venture.[98] It operates both hypermarkets and its express format as well as a home delivery shopping service. It is the second largest retailer in South Korea, just behind Shinsegae Group.[98]
On 14 May 2008, Tesco agreed to purchase 36 hypermarkets with a combination of food and non-food products from E-Land for $1.9 billion (£976 million) in its biggest single acquisition, making Tesco the second largest in the country. The majority of the E-Land stores formerly belonged to French retailer Carrefour before 2006 and most of the stores will be converted to Tesco Homeplus outlets. Tesco's South Korean discount store chain, Home Plus, currently has 66 outlets.[99][100]
Tesco entered Taiwan in September 2004. In September 2005, Tesco sold its stores in Taiwan to Carrefour.
Tesco entered Thailand in 1998 and operates through 380 stores as part of a joint venture with Charoen Pokphand and named the operation Tesco Lotus. This partnership was dissolved in 2003 when Charoen Pokphand sold its shares to Tesco. Tesco Lotus sells a diverse range of products from value food products to electronics to personal finance services. The company is keen to promote its green values and has partnered with the UNEP. Tesco Lotus claims to serve 20 million customers every month and that 97% of its goods are sourced from Thailand.[101]
Tesco entered Turkey in 2003 and uses the trading name "Kipa". Tesco remains focused on building infrastructure in Turkey to complete its expansion plans and has already introduced the Tesco Express format into Turkey. There are plans to increase the rate of expansion as basic infrastructure is built.[80] The first Tesco Extra in Turkey opened in Izmir, Turkey, Tesco Kipa Extra Balçova in September 2010.
Tesco moved into the United States market in 2007, opening a chain of grocery convenience stores, named Fresh & Easy, on the West Coast (Arizona, California and Nevada).[102] The company established its U.S. headquarters in El Segundo, California, and the first store opened in Hemet, California in November 2007, with 100 more expected in the first year; they planned to open a new one every two-and-a-half days in the United States.
Although the planned rate of expansion was not maintained, largely because of the recession, Fresh & Easy now (August 2011) operates 182 stores in Arizona, California and Nevada.
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 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year. 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.
| 52/3 weeks ended | Turnover (£m) | Profit before tax (£m) | Profit for year (£m) | Basic earnings per share (p) |
|---|---|---|---|---|
| 26 February 2011 | 67,573 | 3,535 | 2,671 | 33.10 |
| 27 February 2010 | 62,537 | 3,176 | 2,336 | 31.66 |
| 28 February 2009 | 54,300 | 3,128 | 2,166 | 28.92 |
| 23 February 2008 | 47,298 | 2,803 | 2,130 | 26.95 |
| 24 February 2007 | 46,600 | 2,653 | 1,899 | 22.36 |
| 25 February 2006 | 38,300 | 2,210 | 1,576 | 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 behind Wal-Mart, Carrefour and Home Depot. Tesco moved ahead of Home Depot during 2007, following the sale of Home Depot's professional supply division and a decline in the value of the U.S. dollar against the British Pound. 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 24 February 2007 Tesco operated 1,988 stores in the UK with 27,700,000 square feet (2,570,000 m2) of floorspace and 1,275 outside the UK with 4,040,000 square feet (375,000 m2) of floorspace.
Despite being in a recession, Tesco made record profits for a British retailer in the year to February 2010, during which its underlying pre-tax profits increased by 10.1% to £3.4 billion. Tesco now plans to create 16,000 new jobs, of which 9,000 will be in the UK.[103] In 2011 the retailer reported its poorest six-monthly UK sales figures for 20 years, as a result of consumers' reduced non-food spending.[104]
According to TNS Worldpanel, Tesco's share of the UK grocery market in the 12 weeks to 27 December 2009 was 30.5%, up 0.1% on 12 weeks to 27 December 2008 largely in line with the increase of the other four largest supermarkets.[105] These increases follow a decline in the market share of discount chains Lidl, Aldi and Netto in the same period, collectively of 0.1%.
| Supermarket | Market Share December 2009 |
+/- from December 2008 |
|---|---|---|
| Tesco | 30.5% | 0.1% |
| Asda | 16.9% | 0.1% |
| Sainsbury's | 16.3% | 0.2% |
| Morrisons | 12.3% | 0.5% |
As with any large corporation, Tesco is involved in litigation, usually from claims of personal injury from customers, claims of unfair dismissal from staff, and other commercial matters. Two notable cases were Ward v Tesco Stores Ltd, which set a precedent in so called 'trip or slip' injury claims against retailers; and Tesco Supermarkets Ltd v Nattrass, which reached the House of Lords, and became a leading case regarding the corporate liability of businesses for failures of their store managers (in a case of misleading advertising).
Tesco have been criticised for aggressively pursuing critics of the company in Thailand. Writer and former MP Jit Siratranont is facing up to two years in jail and a £16.4 million libel damages claim for saying that Tesco was expanding aggressively at the expense of small local retailers. Tesco served him with writs for criminal defamation and civil libel.[106]
Criticism of Tesco includes allegations of stifling competition due to its undeveloped "land bank",[107] and breaching planning laws.[108]
In December 2006 The Grocer magazine published a study that named Tesco as having the slowest checkouts of the six major supermarkets. Somerfield had the shortest queues with an average wait of 4 min 23 seconds. In order of least time spent at the checkout, the other major supermarkets were Waitrose, Sainsbury's, Asda, Morrisons.[109]
The Grocer also named Asda as the cheapest UK supermarket (based on 33 items). Tesco was second and Sainsbury's and Morrisons joint third.[109] Tesco price check tends to differ saying out of 7134 (compared to Asda) products, (Survey carried out between 9 July 2007 and 11 July 2007) Tesco is cheaper: 1835 (compared to 1251 the previous week), Tesco is more expensive: 975 (compared to 984 the previous week) and Tesco is the same price: 4324 (compared to 4996 the previous week).[110]
In 2009, Tesco continued to advertise on Fox News's controversial Glenn Beck Show even after 60 major US companies, and a number of UK companies, pulled their advertisements. The cancellations were largely a consequence of Beck's accusation that Barack Obama was racist and had a "deep-seated hatred for white people".[111]
In May 2007, it was revealed that Tesco had moved the head office of its online operations to the tax haven of Switzerland. This allows it to sell CDs, DVDs and electronic games through its web site without charging VAT.[112] The operation had previously been run from the tax haven of Jersey, but had been closed by authorities who feared damage to the Island's reputation.[112] In June 2008, the government announced that it was closing a tax loophole being used by Tesco.[113] The scheme, identified by British magazine Private Eye, utilises offshore holding companies in Luxembourg and partnership agreements to avoid a corporation tax liability of up to £50 million a year.[113] Another scheme previously identified by Private Eye involved depositing £1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments. This scheme is still in operation and is estimated to be costing the UK exchequer up to £20 million a year in corporation tax.[113] Tax expert Richard Murphy has provided an analysis of this avoidance structure.[114]
In February 2008 a six-month investigation by The Guardian claimed that Tesco had developed a complex taxation structure involving offshore bank accounts in the tax haven of the Cayman Islands.[115] Tesco was in the process of selling its UK stores, worth an estimated £6 billion, to Cayman Island-based companies set up by Tesco. These companies then lease the stores back to Tesco. At the time, The Guardian claimed that this arrangement would enable Tesco to avoid an estimated £1 billion tax on profits from the property sales, and also avoid paying tax on continuing operation of the stores, as the rate of corporation tax in the Cayman Islands is zero. Tesco defended its tax arrangements, saying it had a legal duty to its shareholders to organise its affairs in a tax-efficient manner and pointing out that the company already pays significant amounts of tax, including VAT, excise duty and fuel duty on behalf of its customers, PAYE and national insurance contributions on behalf of its employees and corporation tax on its profits.
Following these revelations, several MPs called for an inquiry into Tesco's tax avoidance schemes.[116]
Tesco issued a writ for libel against The Guardian five weeks later. Tesco denied that it had avoided paying £1 billion corporation tax but for legal reasons refused to answer further questions or to clarify the purpose of the tax structure they had created. Further investigations by The Guardian discovered that the tax structures were aimed at avoiding Stamp Duty Land Tax, and not corporation tax as originally thought. SDLT is levelled at 4%, and corporate tax at around 30%, so the figure of £1 billion tax avoided by Tesco has been revised to an estimated £90–£100 million.[117] According to the Guardian, "Tesco has been involved in a game of cat and mouse with HM Revenue & Customs since 2003. On three occasions when the government has closed a loophole to prevent avoidance, Tesco has taken advantage of ingenious schemes to get around it. Tesco still has 36 stores wrapped up in UK limited partnerships—with Cayman Islands registered partners—which were established in 2006 before the latest loophole was closed."[117]
In September 2008, Tesco dropped the legal action after The Guardian apologised for its story, acknowledging "These damaging allegations were unfounded and should not have been published. All profits generated by this sale and leaseback arrangement were earned by UK tax-resident companies and have been or will be included in Tesco's UK tax returns. The use of Cayman Island companies in the scheme was for legitimate stamp duty savings purposes."[118] Costs were paid by the newspaper with undisclosed damages being paid to charity.[118]
The Guardian's parent company, Guardian Media Group, used a similar offshore arrangement to avoid tax during its takeover of Emap.[119]
Tesco's expansion has not been without criticism and, in some cases, active opposition.
In recent years Tesco alumni have had increasing influence on other large listed businesses. Former Tesco senior staffers include:
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