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
people And here is why...
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
voicesBy the man who has
Arsene Wenger tried to sign Eden Hazard
footballAfter 18 years with Arsenal, here are 18 things he has still never done as the Gunners' manager
Life and Style
The new Windows 10 Start Menu
Arts and Entertainment
Kristen Stewart and Robert Pattinson star in The Twilight Saga but will not be starring in the new Facebook mini-movies
tvKristen Stewart and Stephenie Meyer will choose female directrs
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
books(and not a Buzzfeed article in sight)
ebooksAn unforgettable anthology of contemporary reportage
William Hague
people... when he called Hague the county's greatest
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
Arts and Entertainment
Twerking girls: Miley Cyrus's video for 'Wrecking Ball'
arts + ents
Arts and Entertainment
Ed Sheeran performs at his Amazon Front Row event on Tuesday 30 September
musicHe spotted PM at private gig
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?