Tesco fights back against Wal-Mart with overseas strategy

Tesco is mounting a counter offensive against Wal-Mart, the US retail giant which recently acquired Asda, by stepping up its overseas, non-food and Internet operations.

This week, the supermarket announced pre-tax profits up by 8.1 per cent to &£401m for the six months ending 14 August 1999 on sales up 9.9 per cent to &£9.1bn.

Speaking about the results, Tesco chief executive Terry Leahy said the supermarket would eventually generate more income overseas than in the UK.

Leahy added that Tesco will increase its complete non-food offering from 40 outlets to 90. It will boost online sales through a new Internet bookshop and by bringing its financial services arm online.

Analysts welcomed Tesco’s results and say its strategy is clearly intended as a riposte to Wal-Mart – despite Leahy’s insistence that it “does not pose a threat to Tesco”.

Wal-Mart is the world’s largest retailer and able to offer very low prices.

Richard Hyman, chairman of Verdict Research, says: “Whatever Tesco might say, it has got to be looking forward with Wal-Mart in mind.”

Tesco recently announced plans to “introduce the biggest price cuts Britain has ever seen”.

One analyst says: “The latest cost-cutting is a completely new ball game in terms of the scale and the depth. And it is permanent.”

Leahy was also keen to stress Tesco’s international credentials in a consolidating market which has just seen France’s Carrefour and Promodés agree a &£10bn merger.

“The consolidation process is only just beginning. We thrive in competitive and challenging markets wherever we operate and we are on our way to being one of the major international retailers,” says Leahy.

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