(qlmbusinessnews.com Mon. 7th Oct, 2024) London, UK —
Tesco's Market Dominance Grows as It Prioritises Core UK Business
Seventeen years ago, Tesco’s ambitious venture into the US market with its Fresh & Easy stores ended in a humiliating exit, with nearly £2 billion written off. The company was also rocked a decade ago by an accounting scandal and questionable experiments in unrelated sectors like music streaming (Blinkbox), Android tablets (Hudl), and coffee shops (Harris + Hoole). Today, however, Tesco’s approach is vastly different and far more grounded.
In its half-year results announced on Thursday, Tesco predicted a “retail adjusted operating profit” of £2.9 billion for the full year, up £100 million from its last forecast. Given Tesco’s habit of conservative predictions, it wouldn’t be surprising if it reached a round £3 billion.
Tesco appears almost unbeatable when it focuses on its core markets in the UK and Ireland. Lessons learned from the Fresh & Easy debacle have led to a retreat from most international ventures, including operations in Japan, China, South Korea, Malaysia, Thailand, Poland, and Turkey. The retailer now only maintains a small presence in central Europe, but even that business takes a back seat in company reports.
Tesco has slimmed down its non-food operations as well. Tesco Bank is one of the few remaining side projects, but it’s set to be sold to Barclays. The company is more concentrated on UK and Irish food retail than it has been in years, showcasing the benefits of a single-minded focus on its core business.
Tesco’s dominant market share in UK grocery retail stands at 27.8%, more than the combined share of its nearest competitors, Sainsbury’s (15.3%) and Asda (12.6%). This dominance provides Tesco with a significant buying advantage, bolstered by its 2018 acquisition of Booker, which extended its reach into convenience stores. Though the £3.7 billion deal raised competition concerns at the time, there’s no chance of it being reversed.
Factors that once posed a threat, such as the rise of Aldi and Lidl, have been mitigated through aggressive price-match campaigns and Clubcard offers. Meanwhile, Amazon’s much-hyped move into UK grocery retail has yet to seriously challenge Tesco, as the e-commerce giant seems more focused on data centres than supermarkets.
Tesco has also benefitted from the leveraged buyouts of Asda and Morrisons, whose ownership by private equity firms has left them with significant debt, potentially weakening their competitive edge. The stock market has responded positively to Tesco’s strong performance, with shares rising 23% this year. Investors are also looking forward to higher dividends and share buybacks, with half-year dividends already up 10%.
Although Tesco’s current operating profit margin of 4.3% on revenues of £70 billion isn’t excessive compared to industry heavyweights like Unilever and Procter & Gamble, the company is in good shape, according to chief executive Ken Murphy, who earned £10 million last year.
While future missteps could arise under a different leadership, for now, Tesco is riding high, fully focused on its core strength of food retail.
This News Story is brought to you by QLM Business News, your Digital Media Channel
Visit QLM businessnews.com
For more business news stories also follow us on Facebook, X and Youtube.
To Help qlm business news bring you more new stories like this, please like, share and subscribe.
Unlock unparalleled business growth and effortlessly attract a stream of new customers through QLM Business News Sponsored Advertising. Elevate your brand's presence and captivate your target audience with precision. Visit QLMbusinessnews.com and click on “Advertise” to harness the power of strategic advertising. Don't miss this unparalleled opportunity to propel your business to new heights of success!
Disclaimer: All images presented herein are intended solely for illustrative purposes and may not accurately depict the true likeness of the subjects, objects, or individuals referenced in the accompanying news stories.
