STRATEGIC PREVIEW
Strategic Preview: Q1
March - May 2014
2 June 2014
planetretail.net
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David Gray
Retail Analyst
Strategic Preview: Tesco Q1
1. Expectations for the Quarter
2. UK: Q1 Strategic Changes
3. Global: Q1 Strategic Changes
4. Outlook
5. What’s new at Planet Retail
2. UK: Q1 Strategic Changes
Tesco working on domestic restructuring appointing
Tony Hoggett as UK Operations Director.
 Tesco has restructured its UK operations teams as it focuses on the
expansion of smaller formats. Tony Hoggett moves from his current role
as Managing Director for Tesco Extra to become UK Operations Director –
overseeing all UK store formats.
 This demonstrates the importance placed on the UK business by Tesco. In other
moves, Gerry Gray will become Chief Operations Officer at One Stop while former
One Stop CEO Tony Reed will be tasked with developing a blueprint for the global
c-store business.
Tony Hoggett has been appointed
UK Operations Director reporting
into Chris Bush, UK MD.
 The Tesco Express concept remains the company’s fastest-growing major format
despite a slowdown in some international markets e.g. Turkey, CEE.
 A staff restructuring to position the business for a multi-channel future is
nearly complete. The chain has been reviewing roles at all levels to see if
it has the right positions covered to facilitate multi-channel growth.
 While occasioning some short-term pain – repositioning for a multi-channel
future is a positive step considering the growth seen in the online space.
 Again, the restructure must not lead to other larger parts of the business being
neglected – with online sales accounting for just 6% of total UK sales. UK online
generated sales of more than GBP3 billion (USD4.7 billion) in 2013, compared to
an estimated GBP37 billion (USD61.5 billion) across hypermarket & superstore
banners. Clearly, stores will remain a more important part of Tesco’s UK business.
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Robin Terrell, Group MultiChannel Director, will play an
increasingly important role as
the business is restructured for a
multi-channel future.
3. Global: Q1 Strategic Changes
Global update – US
 In Q1, Tesco unveiled plans to return to the US with F&F clothing
stores. F&F stores will open in seven locations on the east coast in
partnership with a local franchise partner – Retail Group of America.
 Expansion of the F&F clothing concept to the US will increase the global reach
of the brand – bringing Tesco closer to its ambition of turning F&F into a
global fashion brand.
 Roll-out has been rapid with more than 40 stores in 10 countries from Europe
to South-East Asia and the Middle East. The first concessions have opened in
department stores in Switzerland. We expect further standalone F&F openings
in various countries in partnership with local players in the next 12 months.
Tesco already operates standalone company-owned
F&F clothing stores in the Czech Republic.
 The rapid expansion has been facilitated through the decision to use
franchising. In clothing and non-food retailing where complex supply chain
infrastructure associated with the handling of perishable goods is not
required franchising makes perfect sense.
 This is for two key reasons: (1) the franchise partner takes most of the risk
and (2) Tesco benefits from the expertise of a local partner. On the flipside,
Tesco does not reap all the rewards if the ventures prove successful.
 Even so, the US is clearly the graveyard of UK grocery retailers. That said,
retailing in clothing products is very different to grocery – making us more
optimistic. Nevertheless we note standalone F&F clothing stores will never be
more than a sideshow for Tesco – with the core business remaining grocery.
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Tesco has also been expanding in partnership with
local players, as in Gibraltar, Western Europe (above).
4. Outlook
In Thailand, despite political unrest expansion will continue – driven
by the Express convenience format.
Tesco Thailand: Outlet Numbers by Format, 2014e–2018f
3,000
169
2,500
239
165
219
2,000
161
Number of Outlets
199
1,500
Express Net Increase
2016 -2018 : 400
1,000
1,588
Express Net Increase
2014 -2016 : 400
2,388
1,988
500
0
2014e
2016f
Convenience
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Note: e – estimate, f-forecast.
Source: Planet Retail
Supermarket & Neighbourhood
2018f
Hypermarket & Superstore