The ratings on Tesco PLC reflect Standard&Poor's Ratings Services' view of the company's 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 leading market position in the profitable but highly competitive U.K. food retail market. The ratings are also underpinned by increasing international diversification and Tesco's successful leveraging of its brand to sell nonfood products. The ratings are constrained by the company's high leverage, although we anticipate that this will improve to levels that are in line with the 'A-' long-term rating over the medium term. Specifically, we believe that adjusted funds from operations (FFO) to debt will approach 25% and that fixed-charge coverage--defined as earnings before
