Steve Hawkes and Christine Seib
We've made some changes
to The Sunday Times
Tesco predicted yesterday that it would be one of the fastest-growing big
retailers in the world this year as it hit back at critics and reported
annual pretax profits of nearly £3 billion.
Sir Terry Leahy, its chief executive, said that the supermarket giant was well
placed to ride out the economic storm – “we are a company for all seasons” -
and rubbished rumours that Fresh & Easy, the group’s fledgeling American
business, was struggling.
He said that sales across the 60 Fresh & Easy stores, open since November,
were ahead of expectations and that customers “loved” the format, despite
widespread speculation that the project had proved a flop.
Sir Terry said: “The only thing I regret about Fresh & Easy is not
doing it 20 years ago.”
Tesco’s shares leapt 28½p, or 7 per cent, to close at 419½p.
Full-year results showed that pretax profits across the Tesco empire rose
nearly 12 per cent to £2.8 billion in the year to February 23, on revenue of
£47.3 billion – up 11.1 per cent. International profits rose 24 per cent to
£701 million, the same amount that was generated by the whole of Tesco a
decade ago. British like-for-like sales are up by more than 4 per cent in
the past five weeks, with Tesco’s Finest and Healthy Living ranges among the
bestsellers.
Total UK sales rose 6.7 per cent in the year to February, with online sales up
by nearly 31 per cent.
Sir Terry said: “The group’s growth prospects are better now than they have
ever been before.
“Clearly, you don’t need me to tell you that the US and UK are slowing, but
Tesco is a value-based brand and we have been through this before. Our price
position has never been stronger. We had the fastest rate of growth of any
major retailer in the world last year and we feel we will able to maintain a
good rate.”
Tesco will invest £4.2 billion over the coming year, despite the economic
gloom, in an expansion drive that will involve nearly ten million sq ft of
new space being opened overseas and will create 30,000 jobs worldwide.
At least four mammoth, four-floor shopping centres are planned for Tesco’s
burgeoning business in China, with each expected to house a Tesco
hypermarket, a leisure centre and dozens of local stores.
Tesco will own each 500,000 sq ft mall – nearly half the size of Blue-water in
Kent – in the latest sign of the supermarket group’s growing scale in the
commercial property market.
Sir Terry said that Tesco would open another 150 Fresh & Easy stores in
America and insisted that the format remained on track to break even in
2009-10. No sales figures were released for Fresh & Easy yesterday, but
the chain is expected to book a £100 million loss this year. Yesterday’s
results follow widespread speculation that the concept, based on Tesco
Express convenience stores in the UK, has been a failure, with some stores
rumoured to be missing sales targets by as much as 70 per cent.
Jeff Adams, Tesco’s chief executive in Thailand, was parachuted into the Fresh &
Easy team last month and new store openings have been put on hold until July
– a pause that Tesco insisted had always been planned.
Sir Terry said: “There’s been a lot of vested interest behind some of the
comments and some genuine, misplaced criticism. If I’m armed with the facts,
why should I worry about what people say?” Sir Terry said that he was was
“perplexed” at the criticism that Tesco receives, given the overwhelming
number of customers who enjoy shopping at its supermarkets.
Tesco’s tax charge fell to £673 million in the year to February after a tax
rebate from the Treasury of nearly £200 million.
Matthew Truman, retail analyst at Lehman Brothers, said: “Tesco’s strong
results should return the market to the reality that this company once again
achieved double-digit sales and earnings growth, and has started 2008 in a
similar vein.”
Tesco by numbers
£37.9bn
UK sales
10.9p
final dividend
£304m
profits from Asia operations
56
stores in China
12
countries outside the UK, where Tesco operates
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I love the Fresh and Easy store in Eagle Rock, CA in the US. I recently moved further away from that town, but find myself carpooling with another neighbour to continue shopping there for the products, brands and prices. Congrats to Tesco for giving the bloated US hypermarkets a run for the money!
Gabe Baptiste, Studio City, CA, USA
Tesco is a success because they provide an excellent product at a low price with accessable stores. This is as a result of high investment in store quality, store format and distribution. Their success is proven by the fact people enjoy shopping at Tescos. Well done good job.
Simon, London,
When can we get a Fresh and Easy in the Houston area, please?
Good for Tesco - great to see a real Brtish success.
Ex-Pat Brit
Roger, Richmond, Texas
what is the point . it never gets ! shown in here any way .
denton, haverford, wales
Dear Sir Terry,
Please move into the Philippine market because the supermarkets here are for the most part full of poor-quality, unvaried and unhealthy foods, and a general lack of Western foods, which leave me pining so much for Tesco. No Carrefour here, so I think competition is weak. I also hope you can move into the China market and force out Carrefour. You're one of our country's greatest heroes. I'm so proud that even Thailand and California have Tesco now. You're a truly brilliant man who has managed to retain his modesty, a tremendous role model. I hope you succeed in making Tesco the biggest food retailer in the world, and the world's most powerful company, as it should be. Forget Bill Gates, Warren Buffett, Carlos Slime, the Google Twins - YOU deserve to be the world's richest man. Your stores, your business models, your products and service quality are superb and restore my pride in British entrepreneurialism. You're truly an inspirational leader of a world-winning company.
ex-pat Brit, Manila, Philippines
I wish they would come into Ireland to offer some competition!!!!!!!!!!!
Nick Knight, Skerries, Ireland
In the US Tesco has to resist the temptation to in any way copy the local ways of selling food. They must stick to their successful formula they have so well proven here in the UK. Every time I travel in the US I always wish I could find an example of my UK experience of a Tesco store. Tesco succeed because they provide a customer with one thing above all other, the feeling that they are there to provide the very best service, best price, best product for that price and absolutely no fake offers. With Tesco here in the UK, what you need is what you get. Absolutely a winning formula.
Chris Coles, Medstead, Alton, United Kingdom
British business at its best. Time to stop whinging and start taking some pride in a great British success story. Well done Sir Terry, way to go!
Joe, London, UK
I'm not sure if the Fresh and Easy concept will be an across-the-board hit. I have my doubts over some of the concepts that don't seem to work well, at least not in California where Trader Joe's and Whole Foods rule the roost. (That Tesco decided to go head-on against these two in Southern California--something American-based chains have no gumption for--gets my respect.)
I think Fresh and Easy can find its niche in California and the West Coast. I happen to love one of its Los Angeles-area stores where I now get all my necessities at unheard-of low prices. I now routinely even buy extra and prepare sandwiches for the homeless that I run into on my way to work. Checking out is a snap, but I would put at least one human being behind the cash register for my lazy brethren who want everything done for them. And stock up and stock up; the sight of empty store shelves on occasion is a no-no in the land of plenty.
Frank J. Garza, La Canada Flintridge, California
one mans crunch is another mans profit, people got to eat, but not in fast food or posh resturants, also expect coffee shops and cheap tat shops in the high street to suffer as shoppers think before drop.
michael joseph , cahersiveen>adams towns, madness
My favourite pasta at Sainsbury's has shot up in price, too!
These stores have massive buying power and can by in huge quanities and/or get bulk discounts. This means they can offset the rise in commodity prices. But they don't.
I now do much of my Shopping at Lidl.
John, London,
As Tesco coin it there are food riots across the world, dire warning of rocketing prices and a national obesity crisis encouraged by the likes of Tesco. The pile it high sell it cheap days are coming to an end-we simply can't afford the Tesco model of over-consumption and the dreaful consequences of their over extended supply chain.
Ray Cobbett, Emsworth, Hants,
Open in Romania.... a booming market at present out shining Hungary and the Czech Rep;! Don't let the French and German Supermarkets rule this pad.... may not be as big as China or US. But Romania was 2nd in Metro's (Macro) Cash and carry sales only to China...
Hadier, Cluj Napoca, Romania
I don't get it. Why the over-emphasis on the Fresh and Easy stores? Is that to distract the public's attention from the fact that they have attained off-the-chart profits? Let's do the simple arithmetic, shall we? If indeed the price of produce has gone up, then Tesco's profits should be the same as previous years or less (less, if in its kindness or miscalculation, it failed to pass on the increased costs). However, that it has reported such profits suggests therefore that it has used the credit crunch and supposed increased price of produce as excuse to hike its prices beyond belief! Here is an example: we used to buy a 1kg bag of pasta for 89p; 2 weeks into the new year, it rose to £2.69p. (On a selfish note, I wish my salary increased at such a rate but on a serious note) I do wonder if the price of produce did indeed increase at such a rate.
Annie, Cambridge, UK
'In 20 years we shall rule the world': Tesco, every little helps.
Adam Watson, Belfast, UK
I don't know what I can do on this end about spreading the word of the Fresh and Easy stores in the Phoenix, Arizona area, but I do love shopping at the one near my home.
Keep up the good work!
Katri Hakes, Phoenix, Arizona USA