Tesco PLC today announces that it intends to enter the United States through the development of a new convenience format, beginning on the West Coast in 2007.
The development of the business will be through organic growth, with initial planned capital expenditure of up to £250 million per year, which will be funded from existing resources, with break-even expected by the end of the second full year of operation. Tim Mason, currently our Marketing and Property Director, will move to the US to run the business, remaining on the PLC Board.
The new format is designed for the American market, following extensive consumer research and modelled on Tesco's highly successful and innovative Express concept, which we now operate in five countries, with over 800 stores serving around eight million customers every week.
International growth forms a key element of Tesco's four part strategy and the business currently trades in 12 countries outside the UK, mainly in Asia and Central Europe. Over half of Tesco's selling space is now outside the UK. Today's announcement represents a strategic move into another developed market, complementing our entry into the emerging Chinese market in July 2004. It will allow us to build our position in the world's largest markets, and brings the population of markets we operate in to 2.1 billion people, contributing over 55% of global GDP.
Tesco Chief Executive, Sir Terry Leahy, commented:
"This is a tremendously exciting move for Tesco which will add a new leg to our international expansion. The United States is the largest economy in the world with strong forecast growth and a sophisticated retail market. It is a market we have researched extensively for many years and over the last year we have committed serious resources to developing a format that we believe will be really popular with American consumers.
"We've put a strong team together, led by Tim Mason and drawing on the wealth of skills and experience within the group. The first stores will open on the West Coast in 2007."
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NOTES FOR EDITORS
ABOUT TESCO
Tesco is the UK's largest retailer and one of the world's leading international retailers. We have reached this position through consistent focus on our four part strategy for growth:
We have a strong, growing core UK business offering customers excellent value, choice and convenience
We aim to be as strong in non-food as we are in food
We follow the customer into new areas – like retailing services such as financial products (Tesco Personal Finance), internet shopping ( www.Tesco.com ) and telecoms (Tesco telecom offers mobile, fixed line and broadband services).
We are a leading international retailer with a long term strategy for growth.
The Tesco Group had turnover of £33,974 million ($59,454 million) with pre-tax profits of £2,029 million ($3,551 million) in the year to February 2005. We have 2,467 stores, employing over 370,000 people in the 13 countries in which we operate. In Europe, outside the UK, we operate in Ireland, Hungary, Poland, Czech Republic, Slovakia and Turkey where we have 305 stores and over 61,000 employees. In Asia we have 343 stores and over 40,000 employees across our businesses in Thailand, S. Korea, Malaysia, Taiwan, Japan and China. We are the market leader in six of the countries we trade in. Tesco is a multi-format business, operating hypermarkets, superstores, supermarkets and convenience stores.
ABOUT THE UNITED STATES
The United States has a population of 296 million making it the third largest country in the world, after China and India. It is by far the largest economy in the world, with GDP of $12,458 billion (£7,119 billion), representing 29.5% of global GDP. Its economy has also seen strong growth, with GDP growing c.5% per annum between 2001-2005. This growth is expected to continue at c.6% per annum between 2005-2010. There are significant areas of population concentration in the USA, with over 54% of the population living in the ten most populous states and 32 cities with populations greater than 1.5 million.
The United States grocery market is currently worth over $600 billion (£343 billion) and is forecast to grow 40% over the next five years. Compared to the UK, there is a higher proliferation of retail formats, including traditional formats such as supermarkets and newer formats such as supercenters, warehouse clubs and dollar stores.
ABOUT TIM MASON
Tim Mason, who is 48, is Marketing, e-commerce, Property and Republic of Ireland Director of Tesco PLC. He joined Tesco in March 1982 and held a number of marketing and buying positions before becoming a Regional Retail Operations Director in 1989 and then Marketing Operations Director of Tesco Stores Ltd in 1993. He was first appointed to the Board in 1995. Tim led the development of our retailing services businesses and in addition to his current role, he is Chairman of tesco.com and a non-executive Director of Tesco Personal Finance and Tesco Mobile. He is also a non-executive director of GCap Media PLC.
An exchange rate of £1 : $1.75 is used throughout this release.
