TESCO is the biggest supermarket group in Britain and Ireland. Led by Terry Leahy, the group has a 30% share of its home market and 25% of the Irish grocery sector, where it has annual revenues of €2 billion and 91 stores. It has also successfully expanded its operations to Asia and central and eastern Europe, which are now key drivers of growth for the group.

Over the past decade, it has moved away from a traditional supermarket format to selling an extensive range of other goods, including CDs, DVDs, clothes, flowers, toys and electronic goods. In addition, it has a network of petrol stations that has shaken up competition in forecourt retailing on both sides of the Irish Sea. It has also successfully entered the financial services arena, offering credit cards, insurance and loans, and telecoms, where it offers cheap, pre-paid mobile packages. The company has a market value of £25 billion (€36.8 billion).

The experts below have been selected for their skills in a number of investment areas. They, or the funds they manage, may hold shares in the companies or sectors discussed.

Martin Cass, director, wealth management, NCB Stockbrokers

TESCO’S shares have underperformed the market since the beginning of the year, rising by a modest 2%. While this may seem understandable against the backdrop of the toughest retail environment for a generation; it hardly reflects the performance of a company that is on track to deliver another year of double-digit earnings growth.

Part of the problem for Tesco is the success that the firm has enjoyed, particularly in its home market.

Tesco takes one pound out of every eight spent in British shops and has a share of the grocery market double that of Asda, its nearest competitor.

Conscious of the bad press that American peer Wal-Mart receives, chief executive Terry Leahy has perhaps disadvantaged shareholders in his attempts to reign in expectations.

Despite the cautious tone adopted by management, however, Tesco’s numbers continue to impress. The company delivered 5.5% like-for-like sales growth, excluding petrol, in its most recent quarter, this compares with a sector showing flat sales growth when Tesco is excluded.

With a store portfolio and landbank offering headroom for the company’s drive into non-food retail segments such as clothing, homeware and electronics, there is still immense potential for organic growth within Britain over the next decade.

Tesco’s perceived dominance has prompted suggestions that the Office of Fair Trading might intervene. This seems wide of the mark, however, given that only last month John Fingleton, the authority’s new chief, reiterated its role as being to protect competition, not competitors.

Tesco’s other main growth platform is its international business. It has made several shrewd investments in the emerging growth economies of Asia and central and eastern Europe, and returns will increase in the coming years as the benefits of local scale begin to flow through.

With ancillary services such as banking and telecoms offering further growth potential, Tesco’s current discount to its sector looks an anomaly.

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