Profit and loss account
This year was another successful trading year for Tesco plc. Total sales increased by 9.8% to £20,358m and underlying pre-tax profit increased by 8.4% to £955m. Adjusted diluted earnings per share rose 8.6% to 10.18p. A final dividend of 3.14p per share is proposed, making the full year dividend 4.48p, an increase of 8.7% over last year.
UK retail sales have grown 7.4% to £18,331m. Like-for-like sales were 4.2% which consists of volume of 3.2% and inflation of 1.0%, with new stores continuing to perform well, contributing 3.2% to sales.
UK operating profit increased to £993m up 8.1% on last year. Tesco’s UK operating margin remained broadly flat at 5.9% in a year when Tesco made substantial investments in price.
Company change programmes continue to deliver increasing levels of efficiencies enabling us to invest for customers and grow profits.
Sales in the rest of Europe accelerated with total sales up 18.8% to £1,527m and contributed an operating profit of £51m, up 6.3%. Sales in the Republic of Ireland in local currency are up 6.1%, reflecting the benefits of company’s store rebranding programme. In Central Europe sales are up 76.8% at constant exchange rates. Tesco 11 new hypermarkets across the region have all traded strongly since opening.
Business in Thailand has seen good growth and the three new stores have contributed to sales of £357m up 96%. In South Korea, Tesco Homeplus achieved sales of £140m in the period since acquisition. In the Asian region Tesco made a small operating loss of £1m.
Tesco Personal Finance has now been trading for nearly three years and share of losses this year are £4m compared to a £12m loss last year.
Tax on underlying profit has been charged for the year at an effective rate of 27.4%.
CHRISTMAS & NEW YEAR TRADING STATEMENT
Monday 15 January 2001
GROUP SALES GROWTH CONTINUING TO ACCELERATE
Group sales for the seven weeks ending 6 January 2001 increased by 15.4%. This growth was driven by excellent performances from all four elements of Tesco strategy: a strong core UK, increasing non-food sales, rapidly developing international stores and expansion into retailing services.
OUTSTANDING UK GROWTH UP 10.5%
Total UK sales for this seven weeks, covering Christmas and the New Year, were up 10.5%. Compared to last year this period included one extra day's trading over the New Year. Like-for-like sales were up 6.9% driven by excellent sales volumes of 7.3%. This performance reflects determination to deliver the best offer for customers as Tesco continue to cut prices. Overall deflation was -0.4%.
STRONG INTERNATIONAL PERFORMANCE
In 2000 Tesco opened 32 stores internationally adding over 3m sq. ft. of new trading space. This represents an increase in International trading space of over 45% on the previous year. International sales were up 50% over the Christmas and New Year period as a result of existing stores maturing and new store openings.
RECORD NON FOOD PERFORMANCE
Company’s strategy of offering excellent value in non-food to customers was a resounding success this Christmas. Tesco achieved sales in all areas including 14,000 DVD players and 8,000 widescreen televisions.
TESCO.COM SALES QUADRUPLE
The roll-out of Tesco.com to cover 90% of the UK population helped drive the performance over Christmas with sales up 400% on last year. To meet this demand Tesco.com recruited 400 new staff, allocated 10,000 additional delivery slots and delivered 30m products.
Some examples of meeting its objectives by Tesco plc.
Product promotions
Objective: to give customers a broad range of strong relevant promotions in all departments of the store.
Examples: hundreds of MultiSave, Link Save and Special Offer promotions in all stores every month.
Product range
Objective: to give customers what they want under one roof.
Examples: constant development of new and exciting food products; introduction of clothing, CDs and videos.
Pricing
Objective: to be competitive especially with regard to the basic lines.
Examples: Value Lines and Unbeatable Value pricing, giving low prices on key brands and own-brand products.
Customer Service
Objective: to provide customers with outstanding, naturally delivered personal service.
Examples: baby changing facilities, no quibble money back guarantee, "one in front" queuing policy.
Store design
Objective: to provide an environment that is easy and pleasant to shop in.
Example: store layouts, fixtures and ambience improved to ease customer flow and make shopping more enjoyable.
Store refurbishment
Objective: to upgrade existing stores to the standard that is expected from Tesco.
Example: existing stores improved to include recent innovations.
Communications
Objective: advertising should appeal to all social and economic groups in a relevant and friendly way. Example: recent television ads.
C2
How the organisational structure, culture and management style of the business affects its performance and operation and helps it to meet its objectives?
I have analysed each of the major functions of Tesco separately. However, it is the effective interaction of business functions that is essential to the success of an organisation in attaining its objectives.
Marketing
Advertising.
Tesco uses advertising in the press, on the radio as well as on television to support the company’s marketing by making the public aware of the products and services available in its stores.
The Tesco logo.
The Tesco logo is a vital part of its image. By 1995 many versions of the logo had evolved and company’s corporate identity was not focused. Company therefore began to use one single Tesco logo that is the same everywhere, on stores, letterheads, posters, lorries....
The new logo has the company name in red, the underlining in blue and the background white. However, given the cost of this change Tesco did not immediately change every logo for the sake of it, but gradually as old items were replaced, repaired, repainted, reprinted or re-designed. This means that it is taking about three years for the new logo to completely supersede all other versions.
Chef’s Club.
The Chefs' Club is an initiative which brings the best advice on food and drink to customers and aims to make shopping more enjoyable. Tesco is working with some of the country's top chefs and other experts who want to share their passion for good food and drink with customers.
Tesco Packaging Design.
Tesco has many "Own Brand" products, and in order to promote its own brand correctly Tesco has its own Packaging Design Department. Products sell for a variety of reasons; in the first instance, the visual appeal of a product is important to attract customers to the product initially, as it is only after the first purchase that the customer is attracted because of the quality of the product and its value for money.
Tesco Product Promotion.
Product promotion is the responsibility of the Tesco public relations team. The team is always involved at the planning stage of any new product or service, and its brief is to generate extensive and appropriate coverage for the new product.Tesco has three key objectives for any product promotion; these are:
· to reinforce the Tesco brand values of quality, choice, price and service
· to maintain the Tesco image as a market leader through its products and services
· to manage product issues - both positive and negative.
Distribution
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