Company Overview
Background of Group
Tesco Ltd. is the largest grocery retailer in the United Kingdom and one of the most recognized consumer-facing brands in the region.
Founded in 1919, the group has evolved from a single market stall into a leading multi-format, multichannel retail enterprise with operations spanning food, general merchandise, banking, and wholesale supply.
As of FY2024, Tesco operates across three main geographical segments:
- United Kingdom (core market)
- Republic of Ireland
- Central Europe (including Czech Republic, Hungary, and Slovakia)
The group serves millions of customers each week and employs over 330,000 colleagues globally.
Retail Footprint
Tesco operates more than 3,400 stores globally, including:
- ~1,800 Express stores
- ~800 Large-format superstores
- ~600 One Stop convenience outlets
- ~700 Booker wholesale depots
The UK represents approximately 80% or more of group revenues and profit.
Supply Chain & Distribution
The group operates one of the UK’s most sophisticated supply chain infrastructures:
- 20+ distribution centres (chilled, ambient, frozen)
- Proprietary logistics fleet with real-time tracking
- AI-driven stock forecasting and replenishment
Urban fulfilment centres and Booker wholesale operations enhance last-mile capabilities and bolster resilience.
Online & Digital Channels
Tesco is the UK’s largest online grocer, processing over 1.2 million online orders per week. It offers:
- Home delivery and click-and-collect options
- Mobile-first shopping app with personalized promotions
- Clubcard loyalty programme integrated across channels
Ancillary Businesses
The group’s subsidiaries include:
- Tesco Bank – Offers personal finance products including credit cards, loans, and insurance
- Booker Group – Wholesale supply to independent grocers and hospitality
Strategic Evolution
In recent years, Tesco has:
- Exited its Asian businesses (Thailand and Malaysia)
- Divested its Poland operations
- Refocused on core UK/European retail and digital transformation
- Announced its ambition to be carbon-neutral in Scope 1 & 2 by 2035
Business & Industry Drivers
- Market Leadership: Tesco commands ~28% UK market share, outperforming peers like Sainsbury’s and Asda.
- Channel Diversification: Tesco leads in online grocery with 1.2 million+ orders weekly and fast delivery via “Whoosh”.
- Pricing Strategy: Combats inflation through Aldi price match, Clubcard discounts, and private-label growth.
- Cost Focus: Targeting £500 million annual cost savings to manage inflation and wage pressures.
- Supply Chain Modernization: AI-driven logistics and resilient wholesale channels support operational agility.
Management & Shareholder Assessment
Leadership
- Ken Murphy (CEO): Oversees the group’s operational strategy and retail growth.
- Imran Nawaz (CFO): Leads cost controls, capital allocation, and investor communications.
Shareholding Structure
- Major institutional investors include BlackRock (~5%), Vanguard (~4%), and Legal & General (~3%).
- Free float is widely held by global funds and individual investors.
Investor Sentiment
- Recent share buybacks have boosted investor confidence.
- Positive analyst outlook due to resilient margins and strong online growth.
Risk Assessment (Including ESG)
Operational & Market Risks
- Fierce competition from discounters (e.g. Aldi, Lidl) and premium chains (e.g. M&S) may compress margins.
- Persistent macro headwinds: wage inflation, energy costs, and potential recessionary demand slowdown.
Supply Chain & Cybersecurity
- Global sourcing creates exposure to geopolitical and logistical disruptions.
- IT systems and omnichannel complexity increase cyber risk—ongoing investments mitigate this.
Financial & Balance Sheet Risks
- Leverage exposure from historic real estate and restructuring investments.
- Defined-benefit pension obligations pose actuarial and funding risks.
ESG Considerations
- ESG Risk Rating: 17.8 (Low Risk – Sustainalytics)
- Focus areas: emissions, plastic reduction, sustainable sourcing (e.g. soy, palm oil)
- Goal: Net-zero operations across Scope 1 & 2 emissions by 2035
Regulatory & Compliance
- Subject to the UK Groceries Code of Conduct – recent regulatory scrutiny over supplier terms.
- Rising compliance requirements in food safety, labor laws, and environmental disclosures.
Summary Table
| Category | Key Highlights |
|---|---|
| Market Share | ~28% (UK Grocery Leader) |
| Sales Growth | +5% Like-for-like sales (UK); +4.6% Group in Q1 FY25 |
| Digital Penetration | 1.2 million online orders/week; rapid delivery across 1,600+ stores |
| Cost Efficiency | £500M cost savings initiative in place |
| ESG Score | 17.8 (Low Risk) |
| Principal Risks | Competition, inflation, cyber, supply chain disruptions, ESG execution |
