Tesco Plans for World Domination

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Tesco Plans for World Domination

LONDON -- As Tesco reported its first half results for fiscal 2007 yesterday, it also unveiled its plans to speed up its expansions abroad. During the second half of this year, Tesco is expected to open 4.43 million square feet of retail space as it expands into Asia and China. This is almost two million more square feet of space than it opened in the first half of the year, which totaled 2.49 million square feet, reported PlanetRetail.com.

For the entire year up to February of 2007, the company will increase overseas space by 35.6 percent, double the rate of expansion in the previous year. Even before Tesco launches in the U.S. (expected to happen in early 2007), the company will have 60 percent of its store space abroad, the Web site reported. The company is opening more stores outside its home country, the United Kingdom, than inside it, having plans for more than 1,000 stores across seven countries by the end of this year as it makes plans for 120 openings this year, the Belfast Telegraph reported.

"I think we are better at adapting than others," Terry Leahy, Tesco chief executive, told PlanetRetail.com. "There are not that many pursuing a strategy of becoming international retailers or speeding up, as Tesco is, and I don't think anybody has demonstrated the ability to build a business from scratch in new countries, as we have."

For the second half ending August 27, revenues from its Asian businesses rose 22 percent to £2.3 billion, for the rest of Europe, excluding the U.K., revenues rose 22 percent as well, to £3 billion. Its total sales inside the U.K. grew 10.2 percent to £17.4 billion. Group interim profits before tax increased 19.7 percent to £1.1 billion, reported the Belfast Telegraph.

Leahy also predicted that there would be more consolidation among international retailers in areas abroad such as China and Hungary as they realize that it was not profitable to expand at those levels. He also said that Tesco is not reconsidering its position in Hungary or Japan -- areas that have seen slow sales during the quarter -- and that it might expand into India as well. If the company found appropriate sites, it would consider more acquisitions to help international expansion, the Web site reported.

"The trick is how long can you leave the gap between going up and coming down. The danger when you're successful is that you get used to your environment. When that changes, you stop picking up on the signals that things have changed," Leahy told the Telegraph. "We have good opportunities for growth, but in the end it will be customers who decide whether we grow or we shrink."