UK: Tesco delivers again - COMMENT
Yet again Tesco delivers a strong set of half-year results that must create some envy among its rivals.
Although some commentators will herald the latest results as a boost for signs of positive consumer spending, the recent performance of Tesco says more about its strategy over the past years than anything else.
UK grocery retailer Tesco has announced strong half-year results as sales have increased by 10.6% on the year to £12.7bn (US$19.5bn). Meanwhile pretax profits have grown from £481m to £545m. The basis of this growth derives from a two-pronged strategy to diversify its product offering and develop its reach internationally.
Tesco's international expansion has enabled the company to spread its risk across more geographic territories and take advantage of growth markets. During the past six months the retailer opened eight hypermarkets across Europe and Asia. In the second half of the year the company will open 28 more.
A strong emphasis on growing its non-food sales has enabled the retailer to diversify away from low-margin food and drink goods. In addition, by stocking a greater variety of non-food goods, such as CDs, clothing, videos and the like, Tesco is increasing its appeal as a one-stop shop among consumers.
Some commentators have suggested that Tesco's results should serve to downplay fears of any dip in consumer spending in the UK. However, these results highlight the robust strategy that Tesco has been pursuing more than anything else.
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