Our top findings from Tesco's Annual Reports

Date : 23 May 2013

In a year where Tesco has had to make some significant business decisions and laid down important building blocks for the future, we examine its Annual Report, as well as its newly renamed 'Tesco and Society' CSR report, pulling out our top findings and what this might mean for the retailer's future direction.

1 A year where the business has got to grips with long-standing issues
Whether it be deciding to reset the profit margin of its UK business, exiting from the US or calling an end to the 'space race', Tesco has made some tough decisions in 2012/13. Some have been painful but many paint a very optimistic picture for the future; it has exited markets in which it sees limited prospects for growth, it has made substantial improvements in the UK, it is taking a more balanced approach to its investments into both its physical stores and the internet and it has completed the migration of the bank onto its own systems.

2 Three years' work in one has got the UK back on track
Tesco CEO, Philip Clarke, has described the effort in the UK as 'Herculean', however he also said that he believes there is five more years' worth of work to come over the year ahead. To name but a few, we can expect a greater number of new milestone stores, further advances in the retailer's London offer, where it has set up a team dedicated to look at operations in the capital, and more advances in its online home shopping service.

2 Real progress towards becoming a global multi-channel retailer
Tesco believes that its new multi-channel vision is a clear way forward for the business and is helping it position itself for how people will shop in the future. It is looking to fuse its great store assets with the internet, creating a seamless experience for customers, with online grocery home shopping now live in nine markets. By the end of 2013/14 it will be online in all markets in which it operates, except India. Further advances to come in the UK in 2014 include, a mobile ewallet and Tesco Bank personal current accounts, which will be accessible via the Smartphone.

2 Building out international capability to achieve sustainable growth
Tesco has repositioned its strategy to ensure its pace and scale of international expansion will be tailored to local conditions. Markets have been split into three categories. Thailand, South Korea and Malaysia will remain the highest priority international markets, where it will look to leverage strong market positions and build out a multi-channel experience. In its European markets Tesco will reduce capital and look to hold market share, so that when economic conditions improve it is ready to take advantage. And finally, the markets of China, Turkey and India will be classed as long-term growth opportunities, with lower allocated capital expenditure than in previous years, until teams can find more profitable operating models.

2 New leadership team with energy and desire to succeed
After a long period with a well established board and executive committee, Tesco believes it has finished going through what it describes as a generational transition in management. The board has been re-shaped to one that is smaller, but one that includes new non-executive directors and will focus on a strategic rather than operational agenda. A largely new executive committee now has a strong mix of experienced but also young, talented and new individuals. This bedding in of new and established management should give the right balance and help take the business forward.

2 New core purpose to reflect changing times
Tesco has decided the time is right to change its core purpose to 'We make what matters better, together'. The new purpose is aimed at giving a simpler message and one that can be understood by all of its 500,000 colleagues in all markets around the world. The purpose keeps the customer at the heart of the business, encouraging every decision to be scrutinised by thinking, what really matters for customers and how can Tesco make this better?

2 Using its 'Scale for Good' to put more back into society
Tesco has added a third value to its existing two long-standing values. The new value will combat those who are cynical about the impact Tesco has on the communities in which it operates and look to further embed the strong track record that Tesco has on CSR into the business. The value will primarily focus on three ambitions; to create opportunities for young people around the world, encourage people to live healthier lives and finally, to play a lead role in reducing food waste globally.

2 Strategic importance of the Tesco Bank will increase
The Tesco Bank will form a more central part of Tesco's future strategy. The retailer's development of the bank means that more of its customers will be able to make transactions online using its financial products, but the bank will also play a more pivotal role in growing loyalty. As it further develops the bank, products and prices will be tailored to deliver the best deals for Tesco Clubcard holders.