The ratings on U.K.-based Tesco PLC are supported by its position as the world's third-largest grocery retailer after U.S.-based Wal-Mart Stores Inc. (AA/Stable/A-1+) and France-based Carrefour S.A. (A/Stable/A-1), and its unrivaled leading market position in the profitable but highly competitive U.K. food retail market. The ratings also are underpinned by increasing international diversification and Tesco's successful leveraging of its brand to sell nonfood products. These strengths are partially offset by the group's increasing indebtedness and weak free cash flow generation due to high capital investments and substantial returns to shareholders. With sales growth of 10.5% (at constant exchange rates) in the six months to Aug. 23, 2008, ahead of Wal-Mart's 9% growth in the six months to Oct. 3, 2008,
