Tesco is one of the worlds leading international retailers. Since the company first the trading name of Tesco, in the mid 1920s, the group has expanded into different formats, different markets and different sectors. The UKs leading retailer Tesco was floated on the stock exchange in 1947 and in 1995 took over rival Sainsburys position as the UK number one. The principal activity of the group is food retailing, with over 2,000 stores worldwide. Tesco has a long term strategy for growth, based on four key parts: growth in the Core UK business, to expand by growing internationally, to be as strong in non-food as in food and to follow customers into new retailing services. The company launched a home shopping service in 2000, allowing customers to order their shopping online. Tesco is now expanding its convenience stores and overseas into areas such as Taiwan, Malaysia, Poland, the US and Ireland.

Upper graph = 12 month share price with 6 month moving average
Lower graph = 12 month volume (red line = volume average).

UK supermarkets braced for battle as Tesco comes out fighting


Sun Jan 18, 2015 9:00am GMT



WM Morrison Supermarkets PLC

MRW.L

192.70p

+4.60+2.45%

01/16/2015




J Sainsbury PLC

SBRY.L

256.80p

+1.50+0.59%

01/16/2015




Tesco PLC

TSCO.L

219.05p

-0.20-0.09%

01/16/2015






* Tesco still clear leader at home with share of about 30 pct

* CEO Lewis has strategy to narrow gap with discounters

* Pre-Christmas price cuts followed by January reductions

* UK underlying sales down just 0.5 percent in Christmas period

By Neil Maidment and James Davey

LONDON, Jan 18 (Reuters) - Four months into the job, Tesco boss Dave Lewis has wasted no time imposing a range of price cuts and customer service improvements designed to regain the initiative in a tough market. There are already signs customers are noticing.

Despite the series of shocks Tesco suffered in the past year, famously prompting billionaire investor Warren Buffett to admit buying into the stock was a huge mistake, it remains clear leader in its home market, lending it the clout to squeeze its "big four" rivals as well as upstart discounters Aldi and Lidl.

Given the success of those two brands, price is a key part of Lewis's revival strategy.

"Lewis will find a way to knock the life out of those discounters and it may feel like carnage for the next two years, but Tesco has too many powerful tools in its tool kit not to come out fighting," said an ex-Tesco UK director, who declined to be named.

While Tesco probably won't beat discounters on a full basket of goods, it can narrow the gap and match some items, and become more competitive.

Lewis will hope shoppers will be prepared to spend a little more overall so they can benefit from Tesco's bigger ranges, superior service and online options not found at the discounters.

Tesco has already followed pre-Christmas price cuts on staples like vegetables with January reductions averaging 25 percent on 380 branded products.

The price of a pack of 80 Tetley teabags for example was cut to 1.99 pounds from 2.29 pounds, working out at 2.49p per bag. Aldi charges 2.25 pounds for a bag of 120 Tetley teabags, equating to 1.88p per bag.

Other cuts were more competitive. The price of a 750 gram pack of Kellogg's cornflakes was cut to 1.98 pounds from 2.48 pounds, equating to 26.4p per 100 grams, slightly undercutting Aldi which charges 2.65 pounds for a 1 kg pack, or 26.5p per 100g.


OMINOUS SIGN

While all of the big players' sales declines were less than some expected over Christmas, it was Tesco's steadier showing that caught investors' eyes and delivered an ominous sign for rivals as it bids to recover from four profit warnings and an accounting scandal.

Having dropped 4.4 percent in the previous three months, its UK underlying sales fell just 0.5 percent in the Christmas period, helping its shares make their biggest one-day gain since 1988 after sliding by almost 50 percent in 2014.

Lewis's move to complement price cuts with more shop floor staff, which meant better-stocked shelves, shorter queuing times at the tills and tidier stores, helped deliver the better performance.

Tesco's fresh food volumes were positive over Christmas for the first time in five years, while industry data showed it outperformed the market in all product areas on a volume basis.

Cost savings, including head office job cuts and store closures, will help fund Lewis' plans. More complex work such as a further pruning of Tesco's sprawling product categories is also on his agenda.

"We gleaned a small insight into a massive programme of work that can make Tesco sell more at a lower cost from a leaner supply chain," analyst Clive Black at brokerage Shore Capital said.


SEISMIC SHIFTS

For its rivals, Tesco's more aggressive stance is increasing the pressure in an already tough market.

Britain's big four grocers, including Sainsbury, Wal-Mart's Asda and Morrison as well as Tesco, have been hit by seismic shifts in recent years.

The German discounters have raced to a combined market share of about 8.3 percent, sparking the big four to spend billions lowering the prices of staple items.

But with anaemic overall growth in a 175 billion pound ($267 billion) market, someone must lose. And for all its recent disasters, Tesco is still by far the biggest player with a market share of around 30 percent, a position perhaps recognised by a stock market rating of 20 times forecast earnings, a 39 percent premium to its UK sector, according to Reuters data.

Sainsbury by contrast trades on just 12 times.

"It's a zero-sum game ... Numbers two, three and four are going to be hit with any Tesco resurgence," Fraser McKevitt at market researcher Kantar Worldpanel said of the big four, which hold a combined 75 percent of the UK market.

Even stellar growth at Aldi and Lidl, whose no-frills ranges have chimed with shoppers, may slow as their appeal is reduced by tumbling prices elsewhere.

Yet Lewis's strategy is not just about price.

In Tesco's toilet paper aisles, products and lines have nearly halved to increase space for top sellers. A subsequent mix of savings on storage, staff hours spent re-stocking shelves and simpler supplier deals have led to an 11 percent price cut for customers. Volumes sold have since jumped.

Price cuts on own-brand products are expected to follow, with savings in IT and logistics and 100 million pounds from a wage freeze. Small loss-making stores are being shut and expansion is slowing.

Tesco has even switched ad agencies to help rebuild its brand, though it has not yet said if it will ditch its dated red-and-blue logo and its "Every Little Helps" slogan used since 1992.

Lewis acknowledges he still has his work cut out.

"The period to Christmas was an encouraging first step," he said. "But nobody is under any illusion that we've got much much more that we need to do."

($1 = 0.6561 pounds) (Additional reporting by Kate Holton; Editing by David Clarke and David Holmes)

Tesco tools up for price cuts war

http://www.ibtimes.co.uk/tesco-tools-price-cuts-war-1484016

Morgan Stanley hikes price target on Tesco, shares snap higher

Mon, 19 January 2015


Morgan Stanley hikes price target on Tesco, shares snap higher



Tesco Quote more






Price: 223.40

Chg: 4.35

Chg %: 1.99%

Date: 09:59



FTSE 100 Quote


Price: 6,558.16 Chg: 7.89 Chg %: 0.12% Date: 10:00

Supermarket operator Tesco has scope to materially improve its UK operations.
Together with moves to optimise its portfolio that should drive the shares to outperform over the next 12 months, Morgan Stanley analyst Edouard Aubin told investors on Monday morning.

With the company's operating margins in terms of earnings before interest and taxes set to return to 3.5% by fiscal year 2019 Aubin decided to hike his price target on the company's shares to 260p from 155p.

Under a bull-case scenario the price target would rise to 330p he added.

The broker's recommendation on the stock was upped to overweight from equalweight.

As of 09:06 shares of Tesco were pacing gains on the top flight index, advancing by 2.88% to reach 225p.

If momentum continues 245p realistic target.

We can but hope - Why Tesco is worth 330p

And there's me getting ready to short, this ship doesn't have a decent captain let alone crew to sail the waters its got itself into....

Leahy, a man who knows about timing... wonder what he's buying next.

did you notice ....
But the retailer would still have to return UK retail margins to 3.5% by 2019 and 4% long-term. Tesco has pencilled in just 1.1% for 2015

why buy?

Sir Terry Leahy – Chairman of B&M



Sir Terry joined the Board as Chairman in December 2012. Sir Terry is a senior adviser to CD&R. He is also currently a Director of Blackcircles.com. Previously Sir Terry worked at Tesco for 32 years during which he served in a number of senior positions, including Chief Executive Officer from 1997 to 2011.

Still going to be a bumpy ride to get Tesco on the right tracks and its still not known if it can be achieved. Selling the bricks and mortar as to say, will only line the bank balance for a time. Cash burn in a full price war is going to be huge and unsustainable for all time. Tesco must be counting on every day price reductions to hit the discounters early on in the promotion, to win back foot fall at a accelerating rate. The huge amount of openings of discounters in the next few years are going to put these stores on more doorsteps of the public to try. Tesco has almost got to turn shoppers away from them in droves. If this does not happen there is going to be troubles ahead. As said before Tesco cannot run on the overheads of the discounters. A big gamble going on here. Also all those hidden assets etc left off the balance sheet have not been addressed. It must be like a huge game of chess ie moving one piece watching all your other pieces and of course watching the oppositions moves and reactions to your moves. If Dave can pull this off he will be a sought after executive.

My view 50/50 if the management can turn Tesco around. Clearly the likes of Aldi are not going to sit and watch as like Tesco sadly did to them. Tesco are out to rip the heart out of Aldi and the likes very early on and no Doubt the same from Aldi. If Tesco cannot achieve growing numbers back through the doors to support the price reductions then without saying they have unanswerable problems.

I think MR Leahy has a guilty conscience , blaming everyone except himself. I hope like in the past Lord MacLaurin slams Leahy. Sadly Ian Maclaurin appointed Leahy to the chief position who then appointed Clarke.



Ex Tesco-chief Sir Terry Leahy: supermarket suffered "failure of leadership" under Philip Clarke


by Jessica Morris

19 January 2015 6:34pm


http://www.cityam.com/207421/sir-terry-leahy-tesco-suffered-failure-leadership-under-clarke

Did not think for a minute that Clarke would stand for that . Good man.


PUBLISHED: January 19, 2015 5:30 pm
Ex-bosses swap blows over Tesco

Former Tesco bosses Sir Terry Leahy and Philip Clarke have traded blows over who was to blame for the problems at the business which were to foreshadow its alarming decline in fortunes.



http://www.expressandstar.com/business/city-news/2015/01/19/ex-bosses-swap-blows-over-tesco/

Tesco: Where it went wrongTesco


Tonight on Panorama we're revealing the main findings of our investigation into Tesco. Of course, it's not possible to flesh out all of the detail in the programme itself, so I've put together the main findings here.

Here's a reminder of the key things we have discovered



http://www.bbc.co.uk/news/business-30886632

The Guardian, Monday 19 January 2015 21.17 GMT

Given the collapse in profitability in the wake of Leahy’s departure, his own legacy has come under scrutiny. He was previously celebrated for turning Tesco into a global retail giant, but problems at home – where it is now closing and abandoning stores – as well as the decision to pull the plug on US venture Fresh & Easy, has led to a re-evaluation.

At the first sign of trouble, Clarke famously accused the Leahy regime of running the important UK business “too hot” – a phrase that described the process of shoring up profits during recession by making cost savings and starving stores of investment. But Leahy bats the suggestion aside in a Panorama documentary broadcast on Monday night, arguing that the bigger problem was that Tesco took its eye off the ball on price.

“The acid test is, are you attracting customers?” is Leahy’s response. “Yes we were, more customers each year. Were sales growing? Yes they were. Tesco is the biggest, people expect it to have the best prices,” he said. “I think that some of that trust has been eroded, which has meant that people have shopped around.”

After years of stable leadership, Clarke’s appointment led to a stream of high-level departures and the criticism that there had been a brain drain. “I think it lost too much talent,” Leahy told the BBC. “It’s a big company, Tesco, and also very empowered – people were given responsibility and trusted to get on with their job, so there was a big team of experienced leaders. And too many of those were allowed to go in too short a period of time and so there was a shortage of experience, the kind of experience you need to carefully navigate a business like Tesco through this very turbulent and difficult period of this long, long recession, with these changes in structure of retailing taking place.”

Leahy goes on to say that the company’s culture changed under Clarke and “not for the better”. He said: “I think if you talked to people who knew Tesco, worked in Tesco when I was there, actually the culture was pretty positive and it has to be, because it employs half a million people and you can’t make them do things, you have to motivate them to do things, they’ve got to want to do it.”

In a statement to the BBC, Clarke said: “Although the company had enjoyed unprecedented success in the past, it was plainly the case when I took over Tesco in 2011 that it faced a number of critical challenges that had been building for some time. In bringing about business and cultural change within the company, inevitably some executives who were not considered to have a role to play in the future of the business were let go. There are many others who remain silent out of loyalty to the company, and who would describe Tesco under my leadership very differently.”





http://www.theguardian.com/business/2015/jan/19/former-tesco-boss-terry-leahy-blames-successor-phil-clarke

Deutsche Bank Hold 221.50 221.40 180.00 220.00 Reiterates

Market Buzz

Charles Stanley picks holes in Morgan Stanley's Tesco 'buy' note

Mon, 19 January 2015


Analyst Garry White at UK broker Charles Stanley has picked a few holes in the arguments behind Morgan Stanley's promotion of Tesco onto its best ideas list.
White agrees that the main problem in determining Tesco's valuation is the fact that we do not know where its margins will ultimately settle, but thinks that the US investment bank's assumptions are rather "heroic", or stretched.

Morgan Stanley analysts calculate Tesco has scope to materially improve its UK operations and return to 3.5% operating margin by 2019 and 4% over the long term as it is confident that the opportunity to improve the efficiency of its UK operations is greater than the market expects.

The US analyst team believes Tesco's commitment to slim down its store ranges will free up significant capital, while combining with leading branded goods companies to fight back against hard discounters could have a "very powerful impact", pointing to a French discounters' market share that went from 14.3% in 2008 to 11.7% in 2014 after a similar pincer move by grocery groups there.

With the end of the store space race bringing UK grocery supply into line with demand, White agrees that the argument so far seems pretty rational.

"However, when [Morgan Stanley] looks at asset disposals its assumptions appear to get a little more heroic. The broker has calculated that having theoretically disposed of all its international assets, Tesco's stub could still worth up to 330p, some 48% above the current share price. This can only be described as punchy," White said.

Overall, Morgan Stanley values Tesco's international operations and data analysis unit Dunnhumby between £12.1bn and £17.1bn, compared with the current Tesco market capitalisation of £17.8bn.

There are risks, which Morgan Stanley accepts, that this investment case could prove too optimistic in the event of a full-blown price war, or from a lack of potential buyers for Tesco's international assets.

"Both of these things are possible," cautions White, who notes the City consensus is against Morgan Stanley, with 17 out of 22 City analysts having Tesco as a 'hold', 'sell' or 'strong sell'.

"Morgan Stanley's bullish view is therefore not shared by the rest of the market. Only time will tell if they are correct. However, the assumptions on its valuation once the international part of its business are sold may be a little on the bullish side," he said.

Panorama gave ex-Tesco boss Terry Leahy an easy ride

The former retail kingpin was allowed to stick the knife into his ill-fated, handpicked successor Philip Clarke.

Clarke did hit back in a statement read out on the programme, saying that when he took over, ‘it faced a number of critical challenges which had been building for some time’. (No, really?)


http://www.managementtoday.co.uk/news/1330042/panorama-gave-ex-tesco-boss-terry-leahy-easy-ride/

Chris Blackhurst: Leahy’s anger is all a bit rich — the rot at Tesco set in under him


http://www.standard.co.uk/business/markets/chris-blackhurst-leahys-anger-is-all-a-bit-rich--the-rot-at-tesco-set-in-under-him-9992981.html

Tesco Narrows Search For Broadbent Successor

Sir Ian Cheshire and John Allan are among the remaining candidates for the Tesco chairmanship, Sky News understands.



http://news.sky.com/story/1412066/tesco-narrows-search-for-broadbent-successor

Tesco tries to rebuild relationship with suppliers

Tesco launches social network for suppliers as retailer's turnaround plan gets backing from analysts


http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11362881/Tesco-tries-to-rebuild-relationship-with-suppliers.html