Tesco PLC

Overview Key strengths Key risks Largest U.K. retailer with 3,712 stores as of Feb. 25, 2023, and leading domestic grocery player, with complementary wholesale and food service operations. Total stores of 4,859 in all the five markets where it operates. Macroeconomic headwinds, persistent inflation, despite some respite in recent months, and high interest rates affecting household budgets. Leading position in the U.K. with a market share of 27.4% according to Kantar, significantly ahead of the second-largest peer (Sainsbury?s with 14.8%). Increasing competition from discounters add to pressures on already-low margins in the U.K. grocery market. Retail business (including Booker) benefits from more robust earnings-to-cash conversion than other large European grocery retailers. Significant lease commitments continue to account for the bulk

...Tesco PLC's half-year results showed a resilient performance despite macroeconomic headwinds and lower revenue from fuel. The current macroeconomic environment and inflationary pressures have significantly affected the grocery sector. Food inflation in the U.K. reached almost 20% in the first quarter of 2023. Since the first quarter, food inflation has eased, falling toward 12% in September 2023 (data from the Office of National Statistics as of Oct. 20, 2023). Overall inflation will remain high in the U.K., falling toward 2% only by the second half of 2024. This will continue to pressure household spending and affect basket sizes, albeit to a lower extent than previous quarters. In addition, competition from discounters will keep constraining the growth prospects of incumbents in U.K. food retailing such as Tesco. In this environment, Tesco invested heavily in maintaining its competitiveness versus discounters with initiatives such as the Aldi Price Match or Clubcard prices. This resulted...

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