Chief Executive’s Q&A
At a time when customers everywhere are feeling the economic strain, we are responding to their changing needs in all our markets by lowering prices, introducing more affordable products and offering even sharper promotions.
These actions, combined with our core strengths – in selling food and everyday essentials, owning our own property and having a broad business base – are helping us to cope well with the effects of the downturn. We are also pleased with the early performance of Tesco Personal Finance under our ownership and with the converted Homever stores in South Korea.
As a result, we have delivered a solid sales and profit performance, both in the UK and internationally, whilst continuing to invest in our long-term strategy for growth. We have made a good start to the new financial year and I am confident Tesco will continue to make good progress even in the current global economic environment.
It has been a very tough time for the economy but the good news is it has been very sturdy growth for Tesco. How have you managed that?
A It has been a very good year and mainly of course that is the dividend of having a long-term, consistent strategy. We’ve invested into this slowdown and that has given us good momentum through the recession. We are growing fast in our overseas countries, laying out networks of stores and we are still opening new space in the UK as well. In addition to that, of course, people have to eat – we’re blessed in that sense, so we don’t face the worst of the slowdown. We’ve also adjusted our business both in the UK and around the world to make sure that we offer better value and better ranges which keeps customers in the stores, and helps volume in the business.
You’re very much in the front line when it comes to knowing what customers are thinking, how they are behaving. Are there any signs that we have perhaps reached the bottom of the recession? What lies in store for the economy do you think?
A It is very fluid at the moment – changes are happening over weeks, so I don’t think you can see any clear direction yet. What I would say is that it looks as if things are stabilising on the consumer front. In the UK the lower interest rates help, as do the lower fuel prices and energy prices, and coupled with the work that we have done in reducing food prices for customers – this helps rebuild confidence. In Central Europe the economics had a big decline early in the summer and the autumn of 2008 – that feels as if it has levelled out, which is encouraging. In Asia it is too early to say. Their decline came later with the destocking of the supply chain and so for them it really hit around December. These are strong economies and the destocking will end and we’ll start to get restocking in the pipeline which will help.
Priorities change during a recession of course for business and customers alike, is there a risk that the focus on green and corporate responsibility slips somewhat?
A It is important that it doesn’t and it’s one of the reasons we lay such emphasis within Tesco on our ‘Steering Wheel’ – our balanced scorecard – so that whatever is going on in the outside world, we keep focused on the things that matter long term. Of course price and trading is important at the moment, but there are big long-term objectives around community and the environment that we have got to stay committed to. Tesco has to help customers change from mass consumption to green consumption. On climate change, we’ve got to learn how to run this business on 80% less carbon. We have got great plans and we are making great progress. Of course it helps the business too – not wasting things is a very good habit at a time like this and one of the reasons our energy bills are down £100 million this year is because of all of the green initiatives we’ve been working on over several years.
Bearing in mind what you have seen in the US so far, are you pleased with the progress?
A I am, yes, because there’s lots to be pleased about. Clearly nobody would have chosen to open into the scale of recession that we’ve seen there, which is particularly stiff in the Western United States, but the customers love the stores and they appeal right across the income range and the age range and that bodes very well for their long-term appeal. Fresh & Easy is more than just a niche retailer – it’s a new and different form of retailing. Customers obviously like the fresh foods and they like the own-brand products, but also are increasingly recognising the tremendous prices that are on offer and of course that is very important at the moment. The operation is very good and it’s strong. We really have created the business that we set out to create in terms of the highest, freshest quality in the market at the best prices in the local neighbourhood. We are expanding the business at a good rate and morale is high.
What excites you most about the year ahead?
A First of all we’re growing – and we’re serving more customers. They have needs; they are just different needs at a time like this. It’s what Tesco is for – to stay close to customers and change as their needs change. That’s got to take a different form in different categories or in different parts of the world. It’s important you have strong, confident local leadership teams who take the responsibility to make those changes. I believe that is happening. If you look at our businesses – whether it’s non-food, financial services or in our international markets – we are growing strongly and we are growing market share. There’s more that we have to do from place to place, but confidence is high. People know what they have to do and have the authority to do it.
Group sales
Third largest grocery retailer in the world
Stores worldwide
The UK is our biggest market and the core of our business. We aim to provide all our customers with excellent value and choice.
Our aim is to be as strong in non-food as in food. This means offering the same great quality, range, price and service for our customers as we do in our food business.
Tesco is an international retailer and wherever we operate we focus on giving local customers what they want.
Tesco has followed its customers into the growing world of retailing services, aiming to bring simplicity and value to complex markets.
Tesco is a responsible business. We aim to take a leadership role in tackling climate change and believe in playing a positive role in all the communities we serve.
