THE BUSINESS AND FINANCIAL PERFORMANCE OF TESCO

The Business And Financial Performance Of Tesco



The Business And Financial Performance Of Tesco

Introduction

Intense rivalry between UK supermarkets has led the major retail groups in the UK to expand their product categories and extend their retail formats in an effort to exploit new sales opportunities. One area that has attracted subsequent investment is online groceries. Indeed the internet is now seen as an additional channel for branding, transactions and customer relationship management (Hackney et al., 2005; Hackney and Burn, 2004; Ranchhod et al., 2004).

IGD (2009) reported that the UK online grocery market was worth between £900 million and £4 billion in 2009, with significant growth predicted for the future, due to retailers being able to reduce their transaction costs, increase the speed and quality of consumer interactions and the increase of their existing markets and consumer base (Turban and King, 2003). Among the largest UK grocery retailers, Tesco, ASDA/Walmart, Sainsbury and Waitrose all now operate online retail facilities. There are many challenges faced by retailers when setting up virtual retail operations. This can be illustrated by Safeway, which withdrew after an early unsuccessful experience before their takeover by Morrisons in 2004. One of the major problems encountered is deciding how to physically organise their online retail operations, specifically whether to supply customers from centrally-located warehouses or from existing stores. One common thread that runs throughout the deployments in online grocery is the reliance on internet technology to enable and sustain competitive advantage. Many see technology as the key to gaining and sustaining competitive advantage, rather than looking at the technology as a support mechanism to support and facilitate the real value adding processes that of, encouraging and supporting the interaction between consumers and the retail outlet.

Business Summary

Tesco is engaged in operating food stores and associated activities in the UK, Republic of Ireland, Hungary, Poland, Czech Republic, Slovakia, Thailand, South Korea, Taiwan, Turkey, Malaysia, Japan and China. Co. offers branded and own label products. Co. offers the following store formats in the UK: Extra, very large stores including a range of non-food products; Superstores, large stores offering a full food range and many non-food products; Compact Superstores; Other stores, mainly selling food ranges and household goods; Metro, city-center stores serving the needs of a busy working population; and Express, petrol station court shops selling a range of everyday products.

Tesco's Financial Performance

As Reported Annual Balance Sheet

2/28/2009

2/23/2008

2/24/2007

GBP

GBP

GBP

Millions

Millions

Millions

Internally generated development costs, gross

879

691

583

Internally generated development costs, net

453

351

320

Pharmacy & software licenses, gross

310

278

233

Accumulated amortization & impairment - pharmacy & software licenses

-197

-163

-128

Pharmacy & software licenses, net

113

115

105

Other intangible assets, gross

318

48

39

Accumulated amortization & impairment - other intangibles

-42

-7

-5

Other intangible assets, net

276

41

34

Goodwill, gross

3,283

1,927

1,684

Accumulated amortization & impairment - goodwill

-98

-98

-98

Goodwill, net

3,185

1,829

1,586

Goodwill & intangible assets

4,027

2,336

2,045

Land & buildings, gross

-

-

16,540

Accumulated depreciation & impairment - land & buildings

-

-

-1,942

Land & buildings, net

-

-

14,598

Other property, plant & equipment, gross

-

-

5,389

Accumulated depreciation & impairment - other property, plant & equipment

-

-

-3,011

Other property, plant & equipment

-

-

2,378

Property, plant & equipment, cost

29,844

25,550

-

Accumulated depreciation & impairment losses

-6,692

-5,763

-

Property, plant & equipment

23,152

19,787

16,976

Investment property

1,539

1,112

856

Investments in joint ventures & associates

62

305

314

Other investments

259

4

8

Loans & advances to customers

1,470

-

-

Derivative financial instruments

1,478

216

-

Deferred ...