Outlook: Tesco's emigration

JUST IN CASE the City didn't get the message at Tesco's half year results last week, the supermarket group was banging the drum again yesterday at an investor relations seminar dedicated to its latest hot subject: overseas expansion. So many British companies have lost their shirts indulging themselves in this favourite of executive pursuits that is it worth examining these plans in some detail.

Within three years, Tesco expects to be making about pounds 150m annually from the first 130 of its planned overseas megastores in markets like Poland, Hungary, Thailand and Taiwan. According to some City projections, overseas trading profits might be as high as pounds 450m two years thereafter, or about a quarter of the group total. The logic of this strategy is hard to fault. Tesco may be the dominant player in the UK, but it is nonetheless vulnerable for that to the present pressures on the industry than its smaller rivals. Constrained by strict planning laws, the domestic market is mature as mature can be, and a new shark has entered the waters in the shape of Wal-Mart.

By contrast, the market in Central Europe is both fragmented and undeveloped, while all these economies will benefit enormously from eventual entry into Euroland. As for Asia, the cost of entry is high but the rewards potentially higher still. So assuming Wal-Mart does not completely destroy UK margins, all would seem set fair for another five years of spectacular growth. That's the bull case for Tesco, anyway. As ever, you have to be an optimist wholly to buy into it. Tesco's management is generally regarded as a class act, but then so was that of Marks & Spencer just before the fall. Perhaps ominously, the first sign of trouble at M & S was when its aggressive overseas expansion strategy began to come unstuck. The list of high street retailers that have caught a bad case of flu overseas starts with Dixons and Laura Ashley, extends through Body Shop and runs on as far as the eye can see.

Even so, Tesco seems to have as credible a strategy as any. Certainly it is a better approach than Sainsbury's, whose decision to expand in North America, another mature market, looks ever more perplexing. If all goes according to plan, Tesco's will emerge at the other end as one of retailing's global elite with a stock market rating to match. But there's many a slip, and while one eye is focused on the long term potential of these underdeveloped markets, another will be firmly concentrated on the immediate game of growing consolidation in Europe's heartland

Suggested Topics
Sport
Romelu Lukaku
sportChelsea striker sends second teasing tweet of the day
News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
News
Robyn Lawley
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
PROMOTED VIDEO
News
people
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns