Last updated 13 April 2023
Tesco Group Plc
Sir John Edward Cohen, popularly known as Jack Cohen, created the Tesco brand name from the initials of a tea supplier TE Stockwell and the first two letters of his surname. The first two Tesco stores opened in 1931.
Today, Tesco is the UK’s biggest supermarket and the third biggest retailer in the world by sales, behind Wal-Mart and Carrefour. Outside the UK, Tesco also operates in the Czech Republic, France, Hungary, Poland, Slovakia and Ireland and has global sales, including VAT, of £58 billion a year.
Financials
After a poor 2017, operating profits subsequently strengthened until being impacted by the coronavirus, which had a material impact on the business, but the recent trading year brought a rebound.
In the 12 months to February 2023, Tesco’s global sales rose 5.3% to £57.6 billion (2021: £54.8 billion) and revenue of £65.8 billion was reported (2021: £61.3 billion). Statutory operating profits however slumped by 40% to £1,525 million (2022: £2,560 million) and profits before tax halved to £1,000 million (2022: £2,033 million).
The bulk of turnover and profit still comes from the UK and Republic of Ireland, where retail sales rose by 4.7% in 2023 to £53.4 billion (2022: £50.0 billion).
To view the financials for Tesco Plc, visit Companies House and use Company ID 755613.
Operations
In the UK, Tesco operates a range of formats. These include the hypermarket and supermarket brands, Tesco Extra and Superstore respectively, to smaller formats, typically in urban locations that offer a stand-alone supermarket as a Metro, or with a petrol station. Express stores are typically below 3,000 square foot, while Metro stores are around 10,000 square foot. Superstores are, with some exceptions, between 20,000 and 50,000 square foot and Extra stores are over 50,000 square foot.
In 2003, Tesco acquired the One-Stop convenience store chain, which has largely been rebranded as Tesco Express. In its store-opening programme, Tesco generally develops stores through its subsidiary Spenhill and also works with external developers, such as British Land and Henry Boot, taking up positions within larger commercial developments across the UK.
In 2016, Tesco cancelled development of 49 stores and removed 1.8m square foot of proposed new space from its pipeline, primarily through reductions in the Homeplus, Metro and Express store estates. In 2018, Tesco acquired Booker for £4 billion and a new discount format, Jack’s, was launched to combat the market share being taken by the German discounters, Aldi and Lidl.
In the UK in 2023, Tesco opened two new superstores in Freshwater and Cinderford, plus 50 Express stores and 18 One Stop stores. Nine Joyce’s stores were converted in Ireland.
Glenigan Data
Tesco was once a staple ingredient of Glenigan’s ranking of the industry’s Top 100 clients but has long since dropped out of this echelon due to a shift to smaller projects In the 12 months to Q1 2023, Tesco let 133 contracts valued at £250,000 or more (2021: 74) and the total value of these awards was £93.9 million (2021: £47.0 million).
Conclusion: Building up
Tesco’s shift in priorities has seen a move, in common with other major grocers, away from major stores to smaller outlets. This has also been allied to a store-buyback programme.
Capital expenditure continues to rise, but the focus in the UK remains on repurposing stores and opening convenience stores and this is reflected in Glenigan’s data. In 2017, the average construction contract let by Tesco was valued at £2.2 million but in a 2018 comparison of the UK’s 10 largest grocers by construction spend, only Iceland was letting smaller contracts than Tesco.
This trend has continued and in the 12 months to Q1 2023, the average contract awarded by Tesco was £705,639 (2021: £635,541). Some larger schemes are in the pipeline such as a £6.6 million supermarket and petrol station in Harrogate (Project ID: 07444187). The group’s absence from the industry’s Top 100 clients was not uncommon. The only grocers to feature are the two German discounters Aldi and Lidl.
Spending has however still increased significantly according to Glenigan’s data. After a 100% rise in the latest year, spending in the 12 months to Q1 2023 has risen by 311% over the past two years.
In the latest financial year, Tesco opened 318,000 sq ft of space in the UK and Ireland but also closed 233,000 sq ft of space, resulting in a net increase of 94,000 sq ft. Capital expenditure rose to £1,069 million (2022: £963 million).
The group is also repurposing land for residential development. Plots have been sold to developers such as West Homes, which is building 1,300 homes on a site at Goodmayes near Romford (Project ID: 19046516). In some cases, Tesco is working with other bodies to develop residential developments including 56 houses at Horncastle in Lincolnshire with Westleigh Homes (Project ID: 14308700).
Tesco will remain a key construction client, but larger projects directly built out by the store are likely to remain relatively scarce.
Winning Work With Tesco Plc
Tesco works with contractors across the range of the UK industry from leading major players to smaller, more specialist outfits. Much of this work had traditionally been procured through long-term framework agreements but in January 2010, Kier was dropped from Tesco’s core G10 Strategic Supplier Group for new stores or extensions.
In June 2012, Tesco was one of four leading supermarkets to voice concerns over using framework agreements and call for a return to competitive tendering to secure greater value. Instead, Tesco’s then chief architect Martin Young said that his company did not think “it makes sense to work with the same firms over and over again, if [looking outside the framework] means cost savings and new ideas.”
Tesco has used events such as Construct UK’s Meet Construction Buyers to contact new suppliers in the industry.
Key Tesco procurement contacts:
UK Head of Assets & Estates – Nick Burrows, tel: 01707-395150
Head of Property Procurement – Chris Rowberry, tel: 01707-395150
Head of Brand, Store Design – Paul Jones, tel: 01707-395150