Tesco Expands in the US

Dear Reader,



This week while reading the Financial Times I discovered a very interesting article regarding Tesco which is a global grocery and general merchandising retailer headquartered in the United Kingdom (Cheshunt, UK). Tesco is present in many countries worldwide including China, Argentina and Mexico. The article I read, which was entitled "Tesco overseas growth offsets slow UK" talks about Tesco wanting to increase the pace of its expansion in the United States.

The decision to expand even further in the United States came as a shock to some since Tesco has been having some slow growth in the grocery sales in the past year and they have therefore been focusing more on their non food goods which includes taking on catalogue retailers such as Argos with strong sales of toys and cookware and their clothing range. Tesco Bank has also been performing very well growing by 13% in the first half to £474m, with 6.5m customers for the retailer’s range of services, which include savings accounts, personal loans and car insurance.

http://www.freshradio.co.uk/resources/images/images/tesco.jpg

Surprisingly enough, the UK remains Tesco's slowest growing region in the second quarter. Total UK sales, including VAT but excluding petrol, grew 4.4 per cent in the quarter, against international sales growth of 11 per cent. Sales in Asia went up 12%, in Europe 9% and in America sales went up an amazing 45%. The US was the fastest-growing region in the first half, with like-for-like sales up by 10 per cent and total sales ahead 43 per cent, albeit from a small base – the US still accounts for less than 1 per cent of Tesco revenues. 

The Tesco expansion plan will bring the chain close to 400 stores in California within two years and they are expecting to see the first profits by 2013. Most of the expansion will be focused around coastal California although the initial plan was to open many more stores around all of the United States. Tesco was going to open new stores in new fast-growing cities such as Phoenix, Arizona or Las Vegas, Nevada but that plan did not succeed since they realized that these "fast growing cities" are really not fast growing, on the contrary, they are not growing at all, due to the subprime issue. Tesco is using the United States market also to expand their "Fresh & Easy" stores, which are only 168 at the moment and are also set for cumulative losses of more than £450m by the time Sir Terry retires next March, to be replaced by Philip Clarke.

While reading this article and researching more on Tesco I wondered if they were moving a bit too fast and being a bit too optimistic. Yes, Tesco is a great group and they have been performing quite well especially abroad but they have also faced some issues, especially in the United Kingdom and it might have been better for them to solve those problems before expanding even further. I feel as though Tesco is trying to do too much too soon and that by doing so they might lose much of the quality along the way (if there ever was any). Tesco has already been caught up in many scandals and maybe its time they start focusing more on the quality of their products and services then on the quantity. 

http://www.thesun.co.uk/sol/homepage/news/article230121.ece




Have a good week,



The Financialista 



Financial Times:
O'Doherty, John (2010) "Tesco overseas growth offsets slow UK" Date Viewed: 5th October, 2010. Available online at:
http://www.ft.com/cms/s/0/32273f0a-d047-11df-afe1-00144feabdc0.html?ftcamp=rss


The Sun:
Cox, Emma (2007) "Cheating stores' sell by scandal" Date Viewed: 5th October, 2010. Available online at:
http://www.thesun.co.uk/sol/homepage/news/article230121.ece


Image:
Fresh Radio (2010) Date Viewed: 5th October, 2010. Available online at:
http://www.freshradio.co.uk/resources/images/images/tesco.jpg


Video:
Thomson, Darryl (2010) "Overseas growth boosts Tesco" Date Viewed: 5th October, 2010. Available online at:
http://video.ft.com/v/625487065001/Overseas-growth-boosts-Tesco