SWOT Report 2013

Top
30
Retailers
Report
Part 3
Counting down from 10 to 1
Featuring in-depth Retail Week Knowledge Bank

SWOT analysis, detailed profiles and top-line stats
www.retail-week.com
Contents
10. Kingfisher
9. Home Retail Group
8. Alliance Boots
7. John Lewis Partnership
6. Co-operative Group
5. Marks & Spencer
4. Morrisons
3. Sainsburys
2. Asda
1. Tesco
3
5
7
9
11
13
15
17
19
21
Methodology
Retail Week has devised the Top 30 Retailers Report by using UK revenue
figures from retailers financial statements for the year ending 2012. All
profit figures are operating profit unless otherwise stated.
All SWOT reports within have been produced by the Retail Week
Knowledge Bank team.
All facts and figures are correct as of December 13, 2013.
www.retail-week.com
company snapshot
Kingfisher
The group
is focusing
on turning
B&Q into an
omnichannel
business
Figures include both B&Q and

Screwfix and are for year to January
2012 (unless otherwise stated)
UK retail sales
4.34bn
UK profit
271m
UK stores
662
(November 2013)
Employees
27,047
Sales growth
UK like-for-like (%)
(full-time only)
Gross margin (%)
ingfisher is the UKs leading DIY retailer. In the UK in late 2013

the group had more than 350 B&Q superstores, which include 29
former Focus stores, and a rapidly expanding chain of 300
Screwfix stores, with 60 added in the last financial year.
The group is one of the UKs most global retailers, having built up a
considerable overseas empire of 420 stores. While B&Q has a presence in
China, outside the UK Kingfisher mostly trades through the Castorama
and Brico Dpt retail brands in France, Spain, Poland, Russia and
Romania. Additionally, the company operates the Kotas chain in Turkey
as a joint venture with Turkish conglomerate Ko Holding. Kingfisher is
also looking to leverage the Screwfix brand overseas. Its website has
recently started delivering to 20 European countries, while there are plans
to open four stores in Germany next year.
International operations accounted for 60% of group sales, which
dipped 2.4% to 10.6bn in the year to January 2013. Domestic sales
remained relatively flat at around the 4.3bn mark and have done so in the
last three years, with an underperforming B&Q being offset by growth at
Screwfix. B&Q sales fell by 3.6% to 3.7bn, while Screwfix boosted sales
by 9.8% to 577m. Group UK retail profit fell from 271m to 234m, its
first decline in three years. This was a result of wet weather over the
summer in 2012 and weak consumer confidence.
In the current financial year, weather has continued to affect the DIY
giants performance. UK retail profit dipped 1.4% in its first half of 2014,
though total sales rose slightly by 0.2% to 2.27bn. At B&Q, sales of
seasonal products fell 11% in the first quarter due to unseasonably cold
weather, but the category surged 17% in the second quarter when the
warm weather arrived.
While Kingfisher reported an improved sales performance in the UK in
the third quarter as like-for-like sales rose 2%, this was mainly driven by
Screwfix. The retail brand reported like-for-like sales growth of 11.1%,
benefiting from store openings and multichannel initiatives such as the
launch of a mobile click-and-collect service.
The group is focusing on turning B&Q into an omnichannel business.
The B&Q site will be relaunched in 2014, which will include some 20,000
additional products for home delivery using the Screwfix omnichannel
infrastructure. Online sales make up just 1% of overall B&Q sales at the
end of the 2013 financial year, and Steve Willett, Kingfishers group
productivity and development director, is aiming to grow its share to
account for 5-10% of sales.
The retailer is also rightsizing B&Qs UK store portfolio. Group chief
executive Ian Cheshire has stated that the retailer could make the same
amount of money with 20% less space across its portfolio. As such, B&Q
has signed 18 agreements with supermarkets to offload some store space.
If the deals go through, the retailer will have slashed its UK space by 5%,
saving 16m in rents and 7m in rates annually.
2008
2009
2010
2011
2012
2013
-2
-1
-4
-2
-3
-6
Sales change (%)
www.retail-week.com
Retail Week 3
SWOT analysis
Kingfisher
Strengths
n International Kingfisher is the worlds third-largest home improvement retailer, behind US retailers Home Depot and
Lowes, but it is by far the largest player outside North America. It has a presence in nine countries, predominately in
Europe, which gives it access to more than 500 million households.
n Synergies In recent years management has intensified efforts to increase synergies between the various businesses.
Management is targeting a 50% core common range across all of the groups businesses, up from just 8% in 2013. As
part of this initiative, the company has increased the proportion of directly sourced product, which accounted for 20% of
group sales in the first half of 2013/14.
n Increased investment in online Kingfisher has continued to invest in its multichannel operations in recent years. This
includes launching a transactional site for TradePoint and mobile click-and-collect for Screwfix, the latter delivering to
more than 20 European countries.
n Management Under the direction of Cheshire since 2008, Kingfisher has completed a four-year Delivering Value plan.
This resulted in increased profitability for the UK business, although there was a slight deterioration in margins in
2012/13 as a result of difficult trading conditions.
n Strong cash flow Because of its relatively high operating profitability, strong working capital control and freehold
property ownership, Kingfisher is cash-generative and has a strong balance sheet.
n Screwfix Through the rapid expansion of the Screwfix format, the group is gaining ground in the UK trade market.
Moreover, strong trading for Screwfix has helped offset an underperforming B&Q in recent years. Despite accounting for
only 13% of UK sales in 2012/13, Screwfix generated around a fifth of overall UK retail profit.
Weaknesses
n DIY market Consumer spending on DIY is inextricably linked to activity in the housing market, which, despite recent
increases in mortgage approvals in the UK, remains at a much lower level than prior to the financial crisis.
n B&Q store network Given the difficult trading conditions and rising proportion of multichannel sales, management has
conceded that the B&Q store network has surplus space. Efforts to rightsize the portfolio by subletting space to other
retailers started in 2013, but this is expected to be a slow process given the constraints of planning requirements and
the scale of the task in the current economic climate.
n Recent B&Q performance Kingfishers performance in the UK has been dragged down by B&Q in recent years. The
reduced operating margin of 3.4% in 2012/13 was only half the level achieved at Screwfix, while the modest 0.4%
like-for-like growth in the third quarter of 2013/14 came on the back of nine consecutive quarters of like-for-like sales
declines.
n China The B&Q business in China is still not profitable, with losses increasing again in 2012/13. The current 40-store
store network appears to lack scale to generate enough return and the group has yet to find a store format that works.
KEY
PEOPLE
Chairman
Daniel
Bernard
Group chief executive
Ian
Cheshire
Group finance director
Karen Witts
n Weather-sensitive The weather has a considerable impact on Kingfishers financial performance, especially as
seasonal outdoor products are an important category for the business.
Opportunities
n Further expansion Kingfisher plans to add slightly fewer than 70 outlets in its existing markets in 2013/14, including
50 new Screwfix stores in the UK. Its fledgling business in Russia continues to perform strongly and is expected to
become a key focus in the coming years. In 2013 the company also expanded into Romania and the group continues to
monitor opportunities to enter new markets.
n Trade business There is still plenty of scope to increase its share of the trade market. In the UK this is taking shape
through further expansion of Screwfix as well as the TradePoint counters, which have been rolled out to all B&Q stores.
Overseas, expansion in the trade market will focus on the well-established Brico Dpt format.
n New generation of DIY customers Growth is also being targeted by convincing a new generation of DIY customers that
home improvement does not necessarily have to be difficult. This is being achieved through the introduction of DIY
classes and the launch of a You Can Do It YouTube channel.
n Common range There is still considerable potential to improve margins through the development of a common range
and a higher proportion of direct-sourcing. The group has developed a number of global super brands in gardening
(Verve), outdoor leisure (Blooma) and cooling (Blyss).
Threats
n Economic conditions across Europe The UK economic recovery appears to be gaining momentum in late 2013, but
this has yet to drive spending on home improvement and incomes continue to be squeezed. Kingfisher is also exposed
to adverse economic conditions across mainland Europe, including in the core French market, with only a slight
improvement expected in 2014.
n Exchange rates With the international business accounting for some 60% of group turnover in 2012/13, the company
is exposed to exchange rate movements. Adverse foreign exchange movements resulted in a reduction in retail profit of
39m during 2012/13.
n Local tastes The group will have to be cautious in how far it develops its common range as it needs to continue to take
into account local preferences and tastes.
www.retail-week.com
Retail Week 4
company snapshot
HOME RETAIL GROUP
rising sales
at Argos
were offset
by another
poor
performance
at Homebase
Figures for year to February 2012

(unless otherwise stated)
UK retail sales
5.38bn
UK profit
84.7m
UK stores
1,073
(February 2013)
Employees
47,832
(February 2013)
2008
2009
2012
2013
Sales growth
2010
2011
UK sales change (%)
ome Retail Group owns high street and multichannel retailer

Argos and the UKs second-largest DIY specialist chain by sales,
Homebase. During the 2013 financial year, Argos closed 11 of its
shops and now has a total store portfolio of 737. Homebase has 333 edgeof-town superstores, after shutting eight stores in 2013. It aims to close a
further 70 over the five years to 2018. Home Retail also owns the Habitat
brand, which includes a UK website and three London stores. It also
stocks its products in-store and online at Homebase and Argos.
More changes to Argoss property portfolio are on the cards, as the
retailer last year revealed it aims to relocate or shut about 75 shops (10%
of the estate) in the next five years. The move is part of a five-year strategy,
which includes 300m of investment, to position Argos as a digital
retailer. Argos managing director John Walden said the retailer will focus
its stores on the collection of product and customer service for sales that
will increasingly be managed online or through mobile.
Furthermore, the Argos catalogue will move from being the lead
channel into a supporting role, while a new digital store format was
being trialled by the end of 2013. The new format will allow Argos to test
a number of new digital and store initiatives, such as fast-track collections
for pre-paid online orders, an emphasis on selling on tablets instead of
catalogues and greater customer support from specially trained staff.
Further boosting its digital credentials, Argos recently entered into a
partnership with eBay. As part of the trial, around 150 Argos stores serve
as collection points for purchases from 50 selected eBay merchants.
Since last year Homebase has been rolling out a new store format which
features an upgraded kitchens offer, including an installation service, and
several new product lines. The format was first trialled at its Aylesbury
store and had been rolled out to seven more shops by mid-2013, with
about 10 more planned over the remainder of the year.
Overall group operating profit surged 62% to 137.4m in the year to
February 2013. However, revenue remained broadly flat at 5.5bn, as
rising sales at Argos were offset by another poor performance at
Homebase. Argos boosted sales by 1.5% to 3.93bn and produced its first
like-for-like growth in five years, at 2.1%. The result was driven by strong
sales of tablets and multichannel, which now represents 51% of the
retailers total sales.
At Homebase the news was less encouraging, as total sales fell 5.2% to
1.43bn. This was mostly a result of poor weather conditions affecting
sales of its seasonal products and the difficult market conditions in bigticket categories. However, in the first half of its 2014 financial year, likefor-like sales rose 2.3% at Argos and 5.9% at Homebase, the latters best
performance since its acquisition in 2002, as sales of seasonal products
were driven by warm summer weather.
Terry Duddy, who has led Home Retail Group for the past seven years,
is to step down as chief executive in July 2014, with the group yet to
announce his successor.
-2
-4
-6
-8
Sales change (%)
www.retail-week.com
Retail Week 5
SWOT analysis
HOME RETAIL GROUP
Strengths
n Market share Home Retail Group is a major player in home and general merchandise, with a 10% market share.
Research body GfK estimates that Homebase has continued to increase its market share in the DIY sheds market in
recent years, while Argos has also increased or maintained market share in some of its key product categories, including
electricals and homewares.
n Strong portfolio of own brands Argos and Homebase are among the best-known brands in UK retailing. The group also
owns a number of strong own brands, including Bush and Alba in electricals, Chad Valley in toys, and Hygena, Schreiber
and Habitat in furniture and furnishings.
n Online Argos is well-established as one of the UKs leading ecommerce retailers and its expertise has also been used to
upgrade Homebases ecommerce offer. At Argos online accounted for 43% of sales in the first half of 2013/14.
n Synergies There is a considerable product overlap between Argos and Homebase, particularly in furniture and
furnishings, allowing for synergies in buying and sourcing. The two formats also pool a number of central resources
including property, IT and human resources.
n Cost savings The company has a proven track record in reducing costs through organisational and infrastructure
changes. In recent years, cost savings, particularly in distribution and the supply chain, have more than offset underlying
cost inflation.
Weaknesses
n Cyclical markets Home Retail Group has grown or maintained its market share in several key product categories.
However, many of these markets have declined in recent years as a result of the slow economic recovery and weak
activity in the housing market.
n Declining margins Profit margins have declined to very low levels in recent years. The group operating margin in
2012/13 stood at 2.5%, compared with margins of more than 6% prior to the economic downturn. Profitability at
Homebase is notably lower than its main DIY rivals, while Argoss margins have also been on a downward trend.
n Like-for-like sales While both formats have reported positive like-for-like sales growth in the first half of 2013/14, this
performance comes against very weak comparatives. Homebase has reported negative like-for-like sales for six out of
the past seven years. Moreover, first-half like-for-like growth of 2.3% at Argos is considered modest given the demise of
Comet, which Argos could have done more to capitalise on.
n Argos store network Critics have questioned the need for Argos to operate such an extensive store network. While
some rationalisation is happening, the importance of the physical network is emphasised by the fact that 90% of sales
involve a store due to the strength of its click-and-collect offer. This is a major conundrum for management.
n Operational efficiencies Despite the groups commitment to containing costs, sales-to-employment ratios at
Homebase have continued to deteriorate and are now at fairly low levels. This calls into question the strategy of moving
towards a more service-oriented and, by implication, labour-intensive format.
KEY
PEOPLE
Chairman
John
Coombe
Chief executive
Terry
Duddy
Richard
Ashton
Opportunities
n Digital stores Under the direction of John Walden, Argos is repositioning itself from a catalogue-led to a digitally led
business, which includes the trial of a new digital store format.
n Homebase differentiation The turnaround plan for Homebase is focused on delivering an enhanced in-store
experience that should bolster its softer, more female-friendly USP. This is being supported by an improved multichannel
offer. With online sales accounting for 6% of overall sales, there is plenty of room for digital growth.
n Partnerships with other retailers The recent trial with eBay is allowing the business to leverage its extensive store
network and could be extended to partnerships with other online retailers. However, parcel service Collect+ already has
a foothold in the click-and-collect market.
n New products The Habitat brand relaunch should help increase customer loyalty, while Argos has shown it is capable of
selling new technology, with strong sales of tablets helping improve performance recently. Capitalising on this trend,
Argos has launched an own-brand tablet.
Threats
n Economy While economic recovery in the UK appears to be gaining traction in late 2013, incomes remain under
pressure from low wage growth and high inflation. The typical Argos customer is very exposed to job insecurity and credit
availability constraints.
n Outdated business model? It is telling that the catalogue showroom store format has died a death elsewhere in the
world but not in the UK. It remains to be seen whether the digital transformation of Argos will be enough to fend off
competition from retailers such as Amazon, Dixons, DFS and Ikea.
n Homebase competition Recent increased activity in the housing market has yet to clearly benefit Homebase. Both of
the companys main competitors, B&Q and Wickes, are well-managed businesses and could potentially exploit any
weakness at Homebase.
n Excessive cost control There is a risk that Home Retail Groups commitment to containing costs will make it more
difficult to maintain customer service standards. This is particularly pertinent since management is looking to improve
service levels across both formats.
www.retail-week.com
Retail Week 6
company snapshot
Alliance Boots
A vital piece
of the
companys
strategy is
its Boots
Advantage
Card
Figures for year to March 2012

UK retail sales
6.71bn
(includes chemists and

opticians)
UK retail
operating profit
750m
UK stores
2,476
(March 2013)
Employees
72,667
Sales growth
(March 2013, UK chemist/

retail employees)
Gross margin (%)
4
2
2008
2009
2010
2011
2012
2013
lliance Boots operates the UKs largest pharmacy chain in terms of

sales, as well as an opticians business and a raft of wholesale
activities. It has just under 2,500 pharmacy-led health and beauty
outlets in addition to 604 Boots Opticians. A vital piece of the companys
strategy is its Boots Advantage Card, with over 17 million active holders in
March 2013 being targeted with personalised in-store and online offers.
Last year parent Alliance Boots entered into a strategic partnership with
US drugstore operator Walgreens to create a global, pharmacy-led health
and beauty business. Walgreens has invested 4.3bn in cash and shares to
acquire a 45% equity interest in Alliance Boots and has the option to
acquire the remaining 55% in 2015. As a result, Alliance Boots executive
chairman Stefano Pessina is now on the Walgreens board, while four
directors from the US company joined the Alliance Boots board.
There have recently been significant changes for Boots. Alex Gourlay,
previously chief executive of the health and beauty division, has moved to
Walgreens to lead its customer experience division. He was replaced by
Simon Roberts, who was promoted from co-chief operating officer of Boots
UK to managing director of health and beauty for the UK and Ireland.
Following the deal, the two businesses have started to target synergies,
for instance through the joint buying of medicines. Boots has also started
selling its No7 brand in the US through selected Walgreens flagship stores,
while Walgreens.com now features a Boots shop with about 300 products
including No7 and Botanics.
Globally, Alliance Boots has major European wholesale interests and a
developing international pharmacy network, with 554 company-owned
overseas stores in the 2013 financial year. There are also 75 franchised
Boots outlets in the Middle East, and Asia is also a key growth market.
Last year the business started selling 500 products in 23 stores operated by
Dairy Farm-owned Mannings in Hong Kong and expanded its wholesale
activities in China through strategic partnerships.
Group sales overall declined 2.6% to 22.41bn, with UK retail sales
accounting for 6.55bn, down 2.4% year on year. Within the domestic
business, sales fell 2.5% at the core pharmacy component and were only
partially offset by 0.9% growth in turnover at the opticians business, which
benefited from a new broader range of frames, clearer pricing and an
improved layout in about half of its stores. The health and beauty division
also delivered a good performance given the tough retail market and
regulatory pressures affecting profitability. Overall, the UK profit
performance was strong as a result of a focus on health and beauty categories
and improved profit margins, as trading profit rose 8.4% to 813m.
During the 2013 financial year Boots online sales rose 17%, with
mobile accounting for one in four visitors and click-and-collect on 45% of
orders. In the current year, Boots continues to invest in multichannel
initiatives. It launched its next-day click-and-collect service over the
summer and then rolled out an in-store marketing campaign for staff to
encourage customers to use its online Tap into Boots offer. It is now
introducing iPads in stores to allow customers to search for products and
watch product demonstrations.
-2
-2
-4
-4
Sales change (%)
www.retail-week.com
Retail Week 7
SWOT analysis
Alliance Boots
Strengths
n Scale Alliance Boots operates the UKs largest pharmacy chain, with some 2,500 outlets. It also operates more than
600 opticians. The group has major European wholesale interests and a developing international pharmacy network,
with 554 overseas units trading in early 2013.
n Merger with Walgreens The recent merger with Walgreens, the largest drugstore operator in the US, has provided
further scale. The merger has created the worlds largest pharmacy chain, with over 11,000 company-owned stores
across 12 countries, as well as the worlds biggest pharmaceutical wholesale and distribution network, with over 370
distribution centres across 20 countries.
n Strength of the brand Boots is a highly regarded and trusted brand both in the UK and abroad. It has built its reputation
by offering quality, value and high levels of service, while maintaining the ethical credentials of its founder.
n Own-label expertise Boots has a strong stable of own brands, including its No7 cosmetics brand and skincare brands
such as Soltan and Botanics.
KEY
PEOPLE
n Loyalty card The Boots Advantage Card has been a major promotional tool and has given the company a competitive
advantage in the sector. The loyalty scheme is one of the largest in the UK, with more than 17 million active cardholders
in recent years.
Executive chairman
n High margins Profit margins of the companys UK retail activities stand at an elevated level and have been improving in
recent years. Its double-digit margins are notably higher than those of key competitors such as Superdrug and Lloyds
Pharmacy.
Weaknesses
n Mature domestic operations Due to its dominance, it will be difficult for Boots to increase its UK market share. Its store
network would appear to be saturated and there is limited room for further expansion.
n NHS spending The companys pharmacy operations are dependent on the Governments reimbursement prices for
generic medicines. These have been in decline in recent years due to the ongoing cost pressures in the NHS.
n Sales of non-core categories While Boots Lifestyle category, which includes baby, nutrition, electricals and
photography, is seen as an important footfall driver, its performance is relatively weak compared with the core beauty,
healthcare and toiletries business. Lifestyle accounted for just 15% of Boots UK sales in 2012/13.
n Boots Opticians The merger with Dolland & Aitchison has created scale for the opticians business, but it is continuing
to struggle suggesting that the merger of two weak players does not necessarily make a strong one.
Opportunities
n Cross-selling opportunities The merger with Walgreens offers scope for Boots own-brand products to be sold in the
US. The retailer already sells its No7 range through the Target value retailer. No7 has also recently been launched in
selected Walgreens outlets and Boots products are now also available through several Walgreens-owned ecommerce
sites.
n Synergies The merger is expected to deliver considerable cost savings for both Boots and Walgreens through
joint-buying of prescription and OTC drugs. In total, synergies of $1bn (650m) are being targeted by the end of 2016,
with some $150m (90m) already achieved in the first year of the partnership.
Stefano
Pessina
George
Fairweather
Managing director of
health and beauty for
UK and Republic of
Ireland
Simon
Roberts
n International There is still plenty of opportunity for further international expansion, with emerging markets such as
China and Latin America high on the agenda. Alliance Boots expertise in wholesale is proving to be an important
advantage strict regulations on pharmacy ownership in many emerging markets mean the company will initially need
to enter some countries through the wholesale route.
n Eradication of debt Alliance Boots considerable debt, of just under 7bn in early 2013, will be assumed by Walgreens
on completion of the merger in 2015, giving Boots the opportunity to deploy its cash flows to new markets rather than
servicing its debt.
n Healthcare services With its healthcare background, the company would appear particularly well-placed to benefit
from regulatory issues resulting from recent Government spending cuts. For instance, Boots could capitalise on the
Governments plans to shift a number of routine health tasks from doctors surgeries to pharmacists.
Threats
n Competition from discounters While its main rival Superdrug has been underperforming in recent years, competition
has continued to intensify from value players such as Savers. There is also increased competition from non-specialists
such as the single-price retailers, which have all benefited from constrained consumer incomes over the past few years.
n Grocers The major supermarket chains are continuing to improve their health and beauty offers as they seek to
capitalise on their ability to offer a one-stop-shop. In addition to launching new in-store pharmacies, it is interesting to
see that Sainsburys has also started opening outpatient hospital pharmacies, emphasising that this remains a
lucrative sector for the grocers.
n Community pharmacies Community pharmacies of which Lloyds Pharmacy is the largest operator in the UK could
become an increasing threat given that neighbourhood locations are likely to be more accessible for the ageing
population than Boots high street network.
www.retail-week.com
Retail Week 8
company snapshot
JOHN LEWIS Partnership
John Lewis
has yet to
take full
advantage of
its potential
for
international
growth
Figures for year to January 2012

UK retail sales
7.76bn
UK profit
391m
UK stores
347
(September 2013)
Employees
76,600
(28,200 in department stores

and 48,400 in supermarkets)
UK sales change (%)
ohn Lewis Partnership (JLP) comprises the John Lewis department

stores and Waitrose supermarkets. John Lewis has just 39 stores,
nine of which are its smaller At Home format, but it is still the UKs
largest department store operation in terms of sales. Waitrose has 271
supermarkets and nearly 40 Little Waitrose convenience stores. According
to Kantar data Waitrose has a 4.8% share of the grocery market in the 12
weeks to November 10, 2013. The group, which also offers financial
service products, is unique in that it has an employee-based ownership
model, in which staff receive a share of profits.
JLP sales rose 9.1% to 8.47bn in the year to January 2013. Waitrose
accounted for 5.42bn and John Lewis generated 3bn, with both
businesses growing sales well ahead of their respective markets. Waitrose
sales rose by 6.8% in a slow market, accelerating in the second half as
investment in lower prices began to pay off. The department stores
performed even better, as sales increased by 13.5%, driven by a 41% surge
in online sales. Group operating profit also rose, up 61.4m on the year to
452.4m.
The department store chains success has been driven by its investment
in multichannel. In September John Lewis claimed its online sales passed
the significant milestone of 1bn on a rolling 52-week basis, a full year
ahead of target. It has also been experimenting with a smaller department
store format to leverage its multichannel operations and facilitate
geographic expansion. The first such store was unveiled in Exeter in 2012
and another store is to be opened in York next year.
Despite being a multichannel leader, John Lewis has yet to take full
advantage of its potential for international growth. However, a new store
at Heathrow Airports revamped Terminal 2 next year signals the start of
the brands efforts to boost global awareness. It already delivers to more
than 30 international markets.
At sister business Waitrose, the investment in expanding product
ranges has been vital to success in recent years. The launch of the Essential
Waitrose range in early 2009 and the Brand Price Match has helped
change consumer perceptions that the retailer is expensive. However, the
launch of several upmarket ranges such as Seriously, Duchy Originals and
Love Life continues to emphasise its upmarket positioning.
Managing director Mark Price aims to triple Waitroses sales in the next
10 years and will invest 300m per year to hit the target. The investment
will enable the business to open 20 stores per year, with an emphasis on
the convenience format. It also plans to grow its online business, which
surged 40.5% in the first half of 2014.
Since 2011, Waitrose has ramped up investment in ecommerce
following the sale of its stake in Ocado. It now solely acts as a supplier and
commercial partner to the etailer. This year the grocer added extra
capacity to fulfil its online offer, and is adding a second dark store in
London next year.
Sales growth
12
10
2012
2013
2008
2009
2010
2011
Sales change (%)
www.retail-week.com
Retail Week 9
SWOT analysis
JOHN LEWIS partnership
Strengths
n Strong service culture The Partnership structure in which employees share in profits fosters a deep-rooted
commitment to customer service across the whole organisation.
n Food and non-food The fact that JLP is strong in both food and non-food means it is not over-exposed to a single
market. It also provides synergies in terms of store locations and multichannel operations.
n Enviable reputation for quality John Lewis and Waitrose are among the most trusted retail brands in the UK and are
synonymous with quality.
n Affluent customer base Both operations are relatively upmarket in terms of positioning, with Waitrose particularly
strong in the more affluent southeast, an approach which has protected JLP during the prolonged downturn.
n Price promises The department stores Never Knowingly Undersold pricing stance instils a high degree of
confidence, while Waitroses more recent Brand Price Match and the introduction of the Essentials range shows
that it has remained in-tune with consumers during the downturn.
n Important multichannel player The enforced delay to the department store development programme has
encouraged JLP to maximise multichannel opportunities.
KEY
PEOPLE
Chairman
n Lack of flexibility Given its ownership structure, JLP is less flexible than other retailers in terms of reducing labour
costs. While management has tackled operational issues such as call centres, manufacturing capacity and
distribution overheads in recent years, staff costs-to-sales ratios remain high.
Sir Charlie
Mayfield
n Business now dominated by lower-margin Waitrose operation While the group is perhaps better known for its
department stores, the rapidly expanding supermarket business accounted for almost two thirds of retail sales in
2012/13 but a lower (57%) proportion of profits.
Managing director,
John Lewis
Weaknesses
n Fixed costs Being a high fixed-cost business, the department store outlets are becoming less profitable now that
such a high proportion of sales are generated online.
n Disposal of Ocado stake short-sighted? Management may be regretting the disposal of its significant (45%) stake
in Ocado in light of the food etailers recent tie-up with Morrisons.
n Bureaucracy A disadvantage of the partnership structure is the additional level of bureaucracy this creates.
Opportunities
n Growing market share Both John Lewis and Waitrose have continued to trade ahead of their respective markets
throughout the downturn, but there is scope for both to grow market share further.
Andy Street
Managing director,
Waitrose
Mark Price
n Fashion and beauty The department store business is improving the appeal and design of its fashion and beauty
offer, as showcased in the Oxford Street flagship, where designer collaborations feature strongly.
n Product development Waitrose has developed some very well-regarded exclusive products in recent years, including
tie-ups with Heston Blumenthal and Delia Smith. While lower-priced basics have widened its appeal, it stands to
benefit once the economy shows sustained improvement.
n Smaller format stores are current focus There is scope for significant geographic expansion for both John Lewis and
Waitrose and the current focus on smaller format stores should facilitate this.
n Consumer concern around socio-economic, ethical and provenance issues Growing interest in and concerns
about provenance (especially given the recent horse meat saga), healthy eating and ethically sourced products are
now engrained in the consumer psyche. Waitrose clearly stands to benefit from this.
n International expansion The opening of a store at Heathrows Terminal 2 marks a serious step in JLPs international
growth strategy. The store should heighten the profile of the quintessentially British brand within the terminals
international customer base. John Lewis also plans to increase online sales overseas.
n Wholesale and franchise opportunities The recent tie-up with department store franchise Shinsegae in South
Korea is the first in a planned series of agreements to establish a wholesale presence in the potentially lucrative
Asian market. Meanwhile, the setting up of franchised forecourt shops with Welcome Break highlights another route
to growth for Waitrose.
Threats
n Competition Both formats face extensive competition. Waitrose has Sainsburys and M&S Food in particular clipping
at its heels, while Ocado has now turned into a potential rival through its partnership with Morrisons. For John Lewis,
Debenhams and M&S compete most closely in the household goods arena, though its increasing commitment to
fashion and beauty means House of Fraser and Selfridges are becoming direct competitors.
n Discounting Price-matching, if done too aggressively, could undermine confidence in the initial pricing strategy.
n Preoccupation with Ocado/Morrisons agreement With the retailers legal department currently scrutinising the
terms of the deal and presumably looking at the implications of potentially terminating its supply chain agreement
with Ocado, there is a short-term danger that management could get distracted by the deal.
n Conflict of interests As with other retailers operating in more than one sector, there is always the prospect of
conflicting interests between the two formats in terms of prioritising capital spending.
www.retail-week.com
Retail Week 10
company snapshot
CO-operative group
the Co-op is
looking to
discover
the most
profitable
ecommerce
model

UK retail sales
8.18bn
(includes food, retail

and pharmacies)
UK profit
340.7m
UK stores
3,597
(includes pharmacies)
Employees
101,282
Sales growth
(January 2013)
Gross margin (%)
he Co-operative Group operates the largest retailing components of

the consumer Co-operative Movement. This includes the UKs fifthlargest grocer in terms of sales. Following the Somerfield acquisition
in 2009, the Co-op has 2,816 mostly neighbourhood food stores. The group
also includes the UKs third-largest pharmacy chain, with 781 locations, and
an electricals retailing website with sales of more than 80m.
Group chief executive Peter Marks retired in May and was replaced by
former Kingfisher chief operating officer Euan Sutherland. Divisional
management teams were also strengthened, including the appointment of
former Tesco executive Steve Murrells as chief executive of food. The moves
are part of efforts to modernise the business, which has become increasingly
vital in the wake of serious management issues at the Co-operative Bank
which resulted in the group losing control of its financial services arm.
Furthermore, the groups ethical image has been severely tarnished by the
scandal of former Co-operative Bank chairman Paul Flowers following
allegations of drug-taking. The business responded by launching a businesswide review to deliver a modern management structure while protecting the
Co-ops ethical heritage.
A key hire last year was Andy Haywood, the former IT director at Boots, to
the newly created role of group chief information officer. Haywood is
developing the groups overall IT strategy and reviewing the Co-ops digital
and multichannel operations. In the lead up to Christmas, the Co-op is going
live on Monday December 16 to discover the most profitable ecommerce
model with four online trials, beginning with the launch of a click-andcollect service in Stockport.
Central to the Co-op modernising and competing better in the grocery
market is its True North strategy. The scheme aims to improve availability,
value for money, convenience, customer service and product quality. For
instance, the food division aims to develop the own-brand offer, including
its new Loved By Us range, and intends to relaunch as many as 700 lines by
Christmas.
The investment also includes the launch of the Co-ops new Fresh Format.
First trialled last year, the store design emphasises fresh food through
improved ranges, navigation and merchandising and was in 250 stores by
mid-2013. The retailer aimed to launch a second iteration of the format later
in the year, with 130 planned in 2014.
In the year to January 2013 group revenue rose 1.1% year-on-year to
12.45bn. Of this total, retail sales accounted for 8.29bn, an increase of
1.3%. However, underlying profits across the group nose-dived 89% to
54m as a result of issues in the banking division. Furthermore, the food
division, which accounts for some 90% of retail revenue, reported a 9.5%
drop in underlying operating profits to 288.4m. Profitability was hit as the
business absorbed significant food price inflation and made investments in
service, price and value.
Food sales declined once more over the first half of the current 2014
financial year, down by 0.4% to 3.6bn, driven by unseasonable weather. A
1.3% decline in operating profit was a result of continued investment in the
business and reducing prices to compete better with larger rivals.
50
40
30
2
10
2008
2009
2010
2011
2012
2013
20
-10
-2
Sales change (%)
www.retail-week.com
Retail Week 11
SWOT analysis
CO-operative group
Strengths
n Major food retailer With food sales of 7.4bn in 2012/13, the Co-op is the UKs fifth-largest grocer and is a major
player of considerable scale.
n Largest local store network The vast majority of the Co-ops 2,816 or so food stores are small neighbourhood
shops, making the group the leading player in the currently buoyant convenience store sector.
n New era The appointment of Euan Sutherland as chief executive following Peter Marks retirement in 2013 has
heralded a more dynamic era for the Co-op. An early move to bring the groups Food, Pharmacy and Electrical
businesses under a single retail division (headed by Steve Murrells) has been a clear indication of reform.
n New head office The new head office which became operational in 2013 has been a concrete expression of the
Co-ops integrated and unified future. It has won a series of sustainability accolades.
n UKs third-largest pharmacy network The 780-strong local pharmacy network is an important second string to the
groups retailing bow, generating sales of 765m in 2012/13.
n Ethical image in tune with the times The Co-op has been at the forefront of ethical issues that have become
increasingly important in retailing, and responsible retailing has remained at the heart of its approach.
weaknesses
n Failure to exploit key USPs The Co-op has failed to maximise its strong brand and extensive local store base.
n Perceived as expensive Despite significant investment in lowering prices since 2011, its convenience store roots
mean the Co-op is perceived as expensive, while the superstore operators who have moved into convenience retailing
are considered cheaper. Ongoing investment in prices has exerted downward pressure on margins since 2010/11.
n Somerfield acquisition The acquisition and subsequent integration of Somerfield in 2009 was poorly executed and
exposed previous lack of investment in the infrastructure and product offer.
n Declining market share Market share declined from more than 7.5% immediately following the Somerfield
acquisition to 6.3% by late-2013, according to Kantar data. The Co-op has consistently underperformed compared
with its larger rivals.
n Crisis at the bank The move to expand the financial services division though the acquisition of Britannia in 2009 was
ill-judged, while the appointment of Paul Flowers to chair the bank from the following year proved even more of a
misjudgment. The group lost control of the Bank in late-2013, while repercussions from the Flowers scandal could
damage the wider businesss ethical position and commercial performance.
n Few large stores The Co-op has few stores of significant size, making it difficult to compete with the major grocers.
opportunities
KEY
PEOPLE
Chief executive
Euan
Sutherland
Chief executive, retail
Steve
Murrells
Group chief financial

officer
Richard
Pennycook
n Food stores being overhauled Steve Murrells extensive changes, which include store refurbishments, a
strengthened own-label offer and improved customer service, should invigorate the previously tired store network.
n Increasing segmentation The beefed-up commercial team is overseeing further segmentation of the offer according
to location, which will be key in the increasingly competitive convenience sector.
n Online food launch imminent While the move into online food retailing has been tardy, the Co-op clearly has the skills
and store portfolio to offer a multichannel approach to online grocery. It also has experience of the successful
development of its online electricals business to draw on.
n Strong USPs Fuller exploitation of the Co-ops ethical stance and the trend towards more local shopping under new
management will be key in driving growth.
n Opportunity to modernise The group needs to take advantage of the current root-and-branch review to modernise
its structure and the way that the business is run, while honing its ethical stance.
threats
n Increasing competition The Co-op has traditionally been seen as the soft underbelly of retailing, with its market
share open to widespread attack. Though it is now fighting its corner more nimbly, it is still not easy to compete with
Tesco, Sainsburys, Asda and Morrisons, let alone fast-growing discounters such as Aldi and Lidl.
n All the majors are expanding into convenience The industry is shifting its attention from opening non-food-focused
superstores to the less well-developed area of convenience stores, leading to increased competition for new sites.
n Small basket size likely to hamper online development The group faces a number of challenges in its bid to launch
a viable online food service, including its small average basket size of just 6. The Co-op brand will have to prove a
draw in its own right, with its traditional strength of good locations taken out of the mix.
n Short-term pressures may persist Despite signs of more sustained economic recovery from late-2013, the Co-ops
results for the first half of 2013/14 were poor and there can be no guarantee that things will improve.
n Fallout from Bank problems There will have to be some significant rebuilding of trust in the wake of the Bank crisis,
which has called into question the movements ethical heritage.
www.retail-week.com
Retail Week 12
company snapshot
MARKS & SPENCER
performance
in recent
years has
been
impacted by
declining
like-for-like
general
merchandise
sales

UK retail sales
8.87bn
UK profit
658m
UK stores
766
(March 2013)
Employees
Sales growth
74,758
Gross margin (%)
arks & Spencer is the UKs fifth largest retailer by sales. Annual
sales reached 10bn in 2013 financial year, an increase of 0.9%
on the previous financial year. Some 8.95bn of this was
generated in the UK, also an increase of 0.9%. The retailer has almost 300
mainstream Marks & Spencer stores, nearly 50 outlet stores and some 420
Simply Food stores. M&S is still the UKs largest clothing retailer in sales
value terms, despite its recent difficulties, while food accounts for slightly
more than half of UK sales. The retailer also sells accessories and
homewares.
Food sales have driven domestic growth in recent years, with like-forlike sales consistently ahead of the market, driven by trusted quality,
provenance and ongoing innovation. Overall performance in recent years
has been impacted by declining like-for-like general merchandise sales.
Clothing has performed particularly badly, with efforts to drive sales
impacting profitability. UK operating profit fell for the third consecutive
year in the year to March 2013, down 3.4% to 635.8m.
As a result of the ongoing problems within the general merchandise
operation, in particular the crucial womenswear category, last year highly
regarded executive director of food John Dixon moved across to the
division. Following this, former Debenhams and Jaeger chief executive
Belinda Earl has come on board as style director.
The new teams first autumn/winter 2013 collection was positively
received by the consumer fashion press. The range was backed up by the
high-profile Leading Ladies advertising campaign and improvements to
in-store fashion departments, including Welcome Zones showcasing
new lines, added digital technology to assist in the purchasing experience
and efforts to enhance customer service.
In contrast, M&Ss food offer continues to perform strongly. In the past
year the retailer has launched a value-led range under the Simply M&S
label, and introduced more basic ingredients to allow customers to do a
fuller grocery shop. It plans to open a further 150 Simply Food stores in
the UK to grow its food market share in cities where its market share is
below its average such as Norwich, where it is currently underrepresented.
Multichannel is also a keen focus for the business. Online sales growth
rose by 16.6% in the 2013 financial year, to take overall multichannel
sales to 651.8m. During the period the retailer had extended its M&S
Direct click-and-collect and in-store ordering and collection service to 476
of its stores. It also introduced free next-day delivery to store. As a result,
54% of online orders were placed or collected in-store during the year.
M&S now trades online in 10 countries, including Germany, Spain,
Austria and Belgium. The retailer also has 430 overseas stores across more
than 50 territories, generating sales of 1.1bn in 2013. Its overseas stores
are a mix of partly and wholly owned subsidiaries and franchises across
Europe and Asia.
4
2
3
2009
2010
2011
2012
2013
2008
-2
-4
-1
-2
-6
Sales change (%)
www.retail-week.com
Retail Week 13
SWOT analysis
MARKS & SPENCER
Strengths
n Iconic brand While not the biggest it is currently in fifth position behind the four leading superstore groups in sales
terms Marks & Spencer is one of the strongest brands in UK retailing, with a reputation for quality.
n Highly regarded food offer Food sales have been bolstered by the development of a network of 420 Simply Food stores
and have driven domestic growth of late, generating 54% of 2012/13 UK sales. The current strategy of becoming more
specialist, focusing on quality, provenance and innovation is helping the retailer to maintain its edge over the
competition and is in-tune with current trends.
n Clothing Despite recent hiccups, M&S retains a market-leading position within lingerie, school uniform and clothing for
older women. The clothing strategy is focused on quality and value.
Weaknesses
n Generalist approach found lacking In an increasingly competitive and challenging retail environment, the M&S
approach of trying to be all things to all people has been found lacking.
n Declining profitability Having been in double digits over the three years to 2007/08, UK operating margin has been in
decline since 2008/09 and had fallen to 7.1% by 2012/13. This reflects increased discounting in clothing and the rising
proportion of lower-margin food sales.
n Management comings and goings Top-level churn seems to be endemic, precipitated by fairly regular bouts of
underperformance. A number of relatively long-standing executives have left over 2012 and 2013, and the stream of
departures is showing no sign of let-up.
n Underperformance in clothing Clothing has been underperforming for many years, despite various attempts to
rejuvenate the offer. Kidswear in particular has never seemed to fulfil its potential.
n Sales densities deteriorating Over the past decade, UK sales densities have declined from almost 600 per sq ft to
just above 500 per sq ft, as domestic sales have come under sustained pressure while new space has continued to be
added.
Opportunities
n Improved fashion credentials Since becoming style director in 2012, Belinda Earl has shown her influence in M&Ss
fashion offer, which should drive sales growth.
n Overseas expansion International stores accounted for more than 10% of group sales in 2012/13, but almost 16% of
operating profit. M&S is committed to continued international expansion and has been taking control of an increasing
number of formerly franchised operations. Accelerated expansion in Asia would seem to offer particular potential, with
recent robust growth driven by strong performances in India and China, which are designated as key markets.
n Multichannel M&S.com has driven sales growth of late, bolstered by the Shop Your Way multichannel ordering and
collection/delivery service. However, at 652m in 2012/13, online sales accounted for a relatively modest 6.5% of
group sales, highlighting significant room for improvement. M&S will take full control of its multichannel operations in
2014 when its fulfilment contract with Amazon expires. It will launch a new website in spring 2014.
KEY
PEOPLE
Chairman
Robert
Swannell
Chief executive
Marc
Bolland
Chief financial officer
Alan
Stewart
n Your Beauty The rollout of new beauty departments with a strong multichannel element is paying off, with sales
increasing by 55% in the first half of 2013/14 within the 93 stores which were overhauled.
n Home A new home format is being introduced ahead of the economic upturn which makes full use of online to improve
the range and ease of shopping.
Threats
n Increasing competition in womenswear The womenswear offer continues to face competition from all angles and this
is unlikely to lessen over the years ahead. Despite significant improvements to womenswear in 2013, it may take some
time to convince potential customers of the improved quality and style.
n Food competition The superstore operators have continued to expand their premium and convenience-led offers into
traditional M&S territory, significantly closing the quality gap with M&S Food. Meanwhile, the trend towards more
scratch-cooking during the downturn does not play to M&Ss strengths, despite its recently increased focus on value
and extending its range to enable a fuller shop.
n Lack of online food offer The food for tonight element does not correspond easily to an online model, but as M&S
expands its range, Marc Bolland may live to regret his reluctance to get involved in this key growth sector. M&S will be the
only major mainstream food retailer without some sort of an online food offer from 2014.
n Targeting issues The difficulty of attracting younger, higher-spending customers without alienating its older customer
base has challenged various management teams over the years and remains a huge problem. As such, ranges and
approaches that would be appropriate within the 70 or so flagships are unlikely to be suitable for the significantly higher
number of smaller, provincial stores.
n Scale of challenges Efforts to make the stores easier to shop have been in place since 2011, but have sometimes
seemed more of a nod in the direction of refurbishment than a full-scale overhaul. It remains to be seen whether the
refreshed womenswear departments will do the trick. Meanwhile, the paring back of investment levels is of some
concern given the ongoing challenges.
www.retail-week.com
Retail Week 14
company snapshot
MORRISONS
Morrisons is
behind its
competitors
in the key
grocery
growth
areas of
convenience
and online

UK retail sales
17.66bn
UK profit
973m
UK stores
525
(July 2013)
Employees
131,207
Sales growth
(UK)
Gross margin (%)
orrisons is the UKs fourth-largest supermarket group in terms

of sales, with a market share of 11.5% for the 12 weeks to
November 2013, according to Kantar data.
Following the acquisition of Safeway in 2004 and the opening of 100
additional stores since 2010, the retailer has a total of 525 stores as of July
2013. It is making further inroads in the southeast in particular, where it
has traditionally been under-represented.
Further store growth will be driven by Morrisons new convenience
format M Local, especially in the capital, following the acquisition of a
new distribution and food preparation centre in west London. The grocer
aims to have a total of 100 M Locals in place by January 2014 and another
100 by the end of 2015.
Morrisons is behind its competitors in the key grocery growth areas of
convenience and online. However, after agreeing a 216m technology and
logistics deal with food delivery service Ocado in May 2013, it will launch
an online grocery offer in January 2014. The website will emphasise the
grocers fresh food credentials and will display quality ratings, as well as
the use-by date of products. It will also include an online fishmonger and
a virtual butcher, which will let shoppers choose the quantity and cut of
their meat. The service will launch in Warwickshire, followed by
Yorkshire in February, before expanding to other regions.
Morrisons is also behind in its non-food offer, although in March it
launched its first clothing range. The Nutmeg childrens range is now in
200 stores in dedicated shop-in-shops. Furthermore, the retailers
acquisition of Kiddicare has led to the opening of 11 stores for the
previously online-only retailer, while a move into adult clothing from
2014 is also on the cards.
In terms of its grocery product offer, the retailer focuses on fresh food at
value. Since the 2012 financial year it has been working on a three-year
programme to strengthen its own brand another area in which it has
lagged behind rivals. Some 11,000 products were relaunched as part of the
first phase, which was completed during the third quarter of the 2014
financial year. This encompassed the launch of the M Kitchen range, as
well as the M Savers range, which is designed to offer good quality at the
best price.
As part of the diversification of the retailers product offer, chief
executive Dalton Philips made a series of appointments last year. Of
particular significance was the hiring of former Peacocks managing
director Tim Bettley as the companys first commercial director of clothing.
In the year to January 2013 the retailers sales rose 3% from 17.66bn to
18.12bn. However, like-for-like sales were down 2.1%, while operating
profit also declined 2.5% to 949m. Like-for-like sales continued to decline
over the first three quarters of the 2014 financial year, although overall
growth is being driven by the accelerated convenience store conversion
programme and improvements in its own-brand offer.
12
6
10
4
8
2
6
2009
2010
2011
2012
2013
2008
Sales change (%)
www.retail-week.com
Retail Week 15
-2
-4
SWOT analysis
MORRISONS
Strengths
n Strong fresh credentials Crucial against the background of growing concerns about food provenance and healthy
eating, Morrisons has a strong reputation in fresh food. This dates back to its Market Street concept of in-store butchers,
bakers and fishmongers.
n New store format Morrisons has created a new Fresh Format store that builds on its Market Street image in fresh
produce and creates a more attractive shopping experience. This will have been rolled out to more than 40% of the
estate by the end of the 2013 financial year.
n Vertical integration Morrisons has a high level of vertical integration. This is unusual among the major grocers and
enhances its fresh food credentials. It also meant it was one of the few grocers to emerge unscathed from the horse
meat scandal.
n Less exposed to non-food Unlike its rivals, Morrisons has stuck to its fresh food focus and has eschewed the
hypermarket route. It is therefore not encumbered with surplus non-food space.
Weaknesses
n Recent underperformance Because of a lack of presence in the growth areas of online and convenience, Morrisons
has been underperforming since 2012 in comparison with its rivals. Market share had been reduced to a five-year low
of 11.1% in September 2013, according to Kantar data, although there appears to have been some improvement since.
n Belated move into online food As the only big four grocer not yet online, Morrisons will have a significant amount of
ground to make up when its service launches in 2014.
n Late entrant to the c-store market Morrisons has eventually developed a fresh-focused concept for small local stores,
but is behind Tesco and Sainsburys in tapping into this growing market.
n Overexposed to UK economy Apart from its minority stake in the New York online business Fresh Direct, Morrisons is
entirely focused on the domestic market, leaving it exposed to the UK economic cycle.
n Lack of loyalty card With no loyalty card database, Morrisons lacks the knowledge of its rivals regarding its customers
spending patterns.
n Underexposed in the southeast Morrisons has less coverage in the affluent London and southeast markets than it
does in the north. However, it aims to have 100 convenience stores across this region by the end of 2014/15.
Opportunities
n Multichannel The partnership with Ocado means Morrisons will hit the ground running with its online grocery offer from
early 2014. Also, Kiddicares store presence will raise its profile and help build share of the kidswear market.
n Convenience stores Morrisons will have 100 c-stores by January 2014. The strong fresh focus of the M Local offer
would appear to be in tune with customer demand and changing shopping patterns. Another key USP is keeping prices
consistent with its superstores, an area in which rivals have come under criticism in the past.
KEY
PEOPLE
Chairman
Sir Ian
Gibson
Chief executive
Dalton
Philips
Trevor
Strain
n Additional manufacturing facilities More manufacturing facilities are being added to help increase profit. The
extension of the role of group manufacturing director to include specific responsibility for the various manufacturing
subsidiaries underlines the increased importance of the companys vertical integration.
n Own-label Despite strong vertical integration, Morrisons proportion of own-label sales lags behind competitors,
providing it with a significant opportunity to develop differentiated products and build a strong own-brand offer.
n New store format Morrisons appears to be getting good returns from its new store concept and the revamp programme
has been accelerated, with more than 200 stores converted by the end of 2013.
n Extension of deal with Ocado If Waitrose terminates its supplier agreement with Ocado, there is scope for Morrisons to
take on a potentially lucrative supplier partner role, which would fill the void left by Waitrose.
Threats
n Increasing competition With the top three superstore groups increasing store capacity more rapidly than Morrisons,
it faces mounting competition in its heartland from a more aggressive Asda and the revival of Tesco.
n Brand perception A drift upmarket in customer perceptions could undermine the retailers value image. There is
potential to alienate its traditional customer base with the new, relatively upmarket Fresh Format concept.
n Challenge of diversification New areas such as clothing and online could prove distracting, while the loss of Kiddicare
founders Scott and Elaine Weavers-Wright could be detrimental.
n Will online deliver? The jury is still out on just how different the online grocery offer will actually be from that of
competitors. The profit implications of the 25 year tie-in with Ocado are also a cause for concern.
n C-store issues The target of 100 c-stores is still only a fifth of the way towards the groups recently raised longer-term
ambitions. Morrisons remains well behind its rivals in terms of coverage, with a concept which has yet to prove itself on
any scale. Meanwhile, the accelerated expansion means further investment on the distribution side, as its hub-andspoke model is struggling with fulfilment on a larger scale.
n Commodity prices Rising commodity prices could undermine the profitability of Morrisons manufacturing base, a
downside of vertical integration.
www.retail-week.com
Retail Week 16
company snapshot
SAINSBURYs
Convenience
is a
particular
focus, with
nearly 50
convenience
stores added

UK retail sales
22.29bn
UK profit
789m
UK stores
1,160
(September 2013)
Employees
157,000
Sales growth
(March 2013)
Gross margin (%)
ainsburys is the UKs third-largest retailer after Tesco and Asda. Its
grocery market share is the highest it has been for a decade,
standing at 16.8% in late 2013. As well as groceries, Sainsburys
has an expanding non-food offer encompassing clothing, homewares and
entertainment, all of which are linked to its Nectar loyalty card scheme. It
also has an extensive financial services offer through Sainsburys Bank, as
well as partnerships with British Gas and Vodafone for the provision of
energy and mobile phones. Sainsburys reports that non-food growth is
twice that of food, and has recently relaunched the Tu clothing brand and
extended the By Sainsburys range into general merchandise.
The retailers 1,160 store estate is increasingly becoming a 50/50 mix of
supermarkets and Local convenience stores, with 589 supermarkets and
571 Local stores. Convenience is a particular focus, with nearly 50
convenience stores added during the first half of the 2014 financial year. In
2011 Sainsburys market share in the southeast was 20%, which is double
the average of other regions it operates in. To address this imbalance, the
retailer is focusing on expanding its current store development
programme elsewhere in the UK, with strong growth in space in the east
and northwest of England in the 2013 financial year.
Sainsburys increased sales 4.5% to 23.3bn in the year to March 2013
and operating profit rose 5.1% to 829m, with continued growth driven
by online convenience and non-food. Growth in non-food was
particularly driven by investment in the quality of the offer, in-store
experience and trading space.
The business followed this up with a strong performance in the first half
of its 2014 financial year, with Sainsburys achieving nearly nine years of
uninterrupted like-for-like sales growth. Total sales were up 4.4% and
like-for-likes 1.4%. Own-brand sales remained strong, growing at more
than twice the rate of branded goods.
The online grocery operation continues to perform well, growing at
more than 15% over the first half of 2014. Online accounts for more than
1bn in annualised sales, and orders placed regularly exceed 190,000 a
week, putting Sainsburys in second place behind Tesco in terms of online
grocery. To help meet growing demand in London and the southeast, the
retailer will open its first dedicated online fulfilment centre next year.
Sainsburys has also dedicated a significant proportion of the 2014
financial years 1.1bn investment budget to digital developments. These
include a core systems upgrade across the business, a replatforming of the
online grocery operation and further development of mobile technology.
For the latter in August Sainsburys trialled the extension of the app that
allows customers to scan their shopping on a smartphone and pack it as
they go. However, there is no word on the development of click-andcollect for grocery, which Sainsburys lags behinds its rivals in offering.
In addition to the main website, there is also a Sainsburys
Entertainment website selling games, music, films and books, as well as a
new mobile phone website and sites offering music downloads and videoon-demand services.
6
4
5
3
2
2009
2010
2011
2012
2013
2008
Sales change (%)
www.retail-week.com
Retail Week 17
SWOT analysis
SAINSBURYs
Strengths
n Strongest performer of the big three The UKs third-largest retailer has been outperforming its larger rivals in recent
years. It continues to close the gap with Asda and has a particularly strong position in the affluent southeast.
n Widespread appeal Underpinned by its core own-label food range, Sainsburys has built up a strong reputation for
quality and value. This is supplemented by the Taste the Difference and Basics own brands, which give the grocer
near-universal appeal. Its Live Well For Less mantra is particularly in tune with the current climate.
n Nectar card As the biggest partner in the Nectar loyalty card scheme, Sainsburys has an effective customer
database tool which it uses to incentivise repeat visits and strengthen price perceptions. It has done this recently in
combination with the powerful Brand Match promotion and coupons-at-till.
n Values With a long heritage of social and environmental responsibility, Sainsburys values resonate with consumers.
For example, it is one of the leading sellers of Fairtrade and Marine Stewardship Certified fish; it has run successive
Active Kids promotions; and it sponsors events such as Red Nose Day. It is also among those grocers to have
emerged unscathed from the horse meat scandal in 2013.
n Leadership After mismanagement on a major scale in the early 2000s, the recruitment of Justin King as chief
executive in 2004 has heralded a prolonged period of management stability. His Making Sainsburys Great Again
recovery plan has paid off, with nearly nine years of uninterrupted like-for-like growth.
Weaknesses
n Low profit margins Although it is ahead of Asda, Sainsburys operates at a lower level of profitability than Tesco and
Morrisons.
n Convenience stores Despite an early experimental move into town centres in the late-1990s, full-scale expansion
into convenience failed to take off at the time. Then the retailer failed to fully exploit the potential economies of scale
from its spate of convenience store chain acquisitions in the mid-2000s. As a result, it has been playing catch-up with
Tesco ever since.
n No overseas exposure Having previously failed to make a go of international ventures such as US supermarket
chain Shaws, Sainsburys is wholly exposed to the UK market. However, it has apparently been looking at
opportunities in China and possibly other Asian markets.
KEY
PEOPLE
Chairman
David Tyler
Justin King
John Rogers
n Banking Compared with Tescos banking division, Sainsburys Bank (a joint venture with HBOS/Lloyds until 2013)
has never been particularly profitable, even though its insurance, credit card, savings and loan products are linked to
the Nectar reward scheme. While signalling its commitment to developing its financial services, the acquisition of full
control of the bank in early 2014 will put pressure on profits and earnings.
Opportunities
n Scope for expansion With less than 5% market share in around a third of UK postcodes in 2013 and some 21% of the
UK population living further than a 15-minute drive from a Sainsburys store, there is still significant opportunity for
expansion. Moreover, only a third of the population live within a 15-minute drive of the full non-food offer.
n Non-food Sainsburys has an opportunity to grow its general merchandise business through store extensions and the
new online operation. General merchandise and clothing sales grew at twice the rate of food sales in 2013 and Tu
stands to benefit from its relaunch in Autumn 2013.
n Convenience stores Sainsburys has developed a solid base of new convenience store sites. Having fine-tuned the
Local format, it is now well-placed to grow this business.
n Online growth The retailer has developed a profitable store-based online food delivery operation. An enhanced online
groceries offer has been rolling out since September 2013 and will be available nationwide by Easter 2014.
n Increased customer loyalty Full ownership of Sainsburys Bank from 2014 will enable future products to be even
more tailored to Sainsburys customers, leveraging Nectar data to drive sales uplifts in both financial services and
the supermarkets business. With only around 5% of customers holding a financial product with the Bank in 2013,
there is significant scope to increase this and grow customer loyalty further.
threats
n Takeover speculation The failure of its 2007 bid left the Qatar Investment Authority with a 26% stake in Sainsburys.
Recurring rumours that it may make another move could be destabilising for management and staff.
n Succession issues Persistent rumours that Justin King is looking to leave the business although staunchly denied
highlight succession issues and could also prove unsettling for the business.
n Competition Both Asda and Morrisons are actively looking to increase their presence in Sainsburys traditional
southeastern heartland.
n Pricing issues Sainsburys strong associations with the southeast have resulted in it being perceived as expensive,
and this could be a problem as it expands further north. The late 2013 decision by the ASA to ban Sainsburys latest
Brand Match advert, which was judged to be misleading, could also have a negative impact.
www.retail-week.com
Retail Week 18
company snapshot
ASDA
part of its
customer
offer are its
rapidly
improving
multichannel
credentials
Figures for year to December 2012

UK retail sales
22.81bn
UK profit
433.9m
UK stores
568
(October 2013)
Employees
178,792
Gross margin (%)
sda is the UKs second-largest retailer in terms of sales, with a

grocery market share of 17.2% in late 2013. The Walmart-owned
retailer has 568 stores, comprising 346 superstores, 189
supermarkets and 33 Living stores, which sell furniture and homewares.
It is now set to test a smaller store model through 100 petrol stations
which could signal a move into convenience store retailing if successful.
George clothing is a key part of its retail offer in the form of large in-store
concessions.
Asdas strong 2011 performance was driven by the addition of the Netto
stores to its portfolio, but 2012s results were more pedestrian. Retail sales
rose 5.3% but like-for-likes were only up 1%, driven by investments in
low prices on essentials, product quality and multichannel. Since then,
Asda reported a 1.3% rise in like-for-likes in the first quarter to April and
a 0.7% increase in the second quarter.
Retail operating profit during 2012 was down 6.3% to 433.9m,
although underlying operating profit was ahead by 15.4%. Despite
significant cost pressures, Asdas We Operate for Less programme
continued to reduce supply chain and store operations costs.
In recent years Asda has also invested in improving the quality of its
product offer. For instance, it has partnered with Leiths School of Food
and Wine on the development of the Extra Special food range, and it
continues to extend its Chosen By You range.
However, reducing prices remains key to the grocer. 1bn of price cuts are
planned for the next five years, beginning with 50m of investment in the
first quarter of 2014 on own-label and branded food. Asda chief executive
Andy Clarke recently said that through the combination of cutting prices
and improving products, it will redefine value for UK retail.
Also part of its customer offer are its rapidly improving multichannel
credentials. The Asda Direct site, which sells general merchandise goods,
is supported by click-and-collect across the entire store portfolio.
Meanwhile, following a successful trial last year, click-and-collect for
grocery had been extended to 200 stores by the end of 2013 as part of an
accelerated nationwide rollout to cover 98% of UK postcodes. Asda also
offers same-day in-store collection and has extended cut-off for next-day
delivery of online orders to midnight.
The grocer is hoping to extend its reach by increasing the number of
collection points to 1,000 by 2018, targeting high-footfall locations such as
stations. For instance, in a bid to appeal to commuters, Asda is partnering
with Transport for London to offer shoppers who order before noon the
opportunity to collect their order after 4pm at around half a dozen London
Underground stations.
The George brand remains a key driver of growth as Asda looks to take
the clothing brand overseas through franchise stores and online
expansion. The franchise opening programme accelerated this year, with
ten or so openings across the Middle East and the UAE, as well as recent
moves into Singapore and Malta. Furthermore, this year George.com
launched international delivery, initially in France, Spain, Denmark and
the Benelux countries.
Sales growth
10
6
4
2012
2011
2010
2009
2008
-2
Sales change (%)
www.retail-week.com
Retail Week 19
SWOT analysis
ASDA
Strengths
n Major superstore presence Asda is the UKs second-largest grocery retailer, consolidating its position ahead of
Sainsburys following the acquisition of Netto in 2011. After pioneering the superstore concept in the UK, Asda has a
strong position in its northern heartland.
n Value image Under Andy Clarke, Asda has made the transition from being purely price-led to offering genuine value for
money, successfully balancing its Everyday Low Prices strategy with improving quality across both food and non-food.
n Synergies with Walmart Asda is focused on leveraging the global scale of the Walmart Group in terms of sourcing and
driving down costs through its We Operate for Less programme.
n George Asda pioneered clothing retailing in supermarkets and is now a leading player in the value clothing market.
Weaknesses
n Declining market share At 17.2% in November 2013 according to Kantar data, Asdas market share has been
declining since mid-2012 and is now less than half a point ahead of Sainsburys. Asdas value positioning has made it
particularly vulnerable to discounters.
n Non-food exposure Ambitious expansion plans for the Living format have quietly been downgraded, with the prolonged
downturn hitting consumer spending on discretionary merchandise.
n Regional store base Asdas regional superstore base has been a disadvantage given the recent trend towards
frequent, smaller-basket purchasing patterns. This is also necessitating investment in order and collection points as the
retailer tries to strengthen its multichannel credentials.
n Under-exposed in southeast Given its northern base, Asda is under-exposed to the greater growth potential of London
and the southeast. However, it is hoping to extend coverage across this more affluent region from 2014.
n No loyalty card Asdas lack of loyalty card and resultant customer database makes it less effective than Tesco and
Sainsburys in terms of customer promotions.
Opportunities
n Redefining value As part of its five-year strategy from 2013, Asda is investing 1bn in lowering prices to widen the gap
with its mainstream rivals and close the gap with the discounters.
KEY
PEOPLE
President and
chief executive
Andy
Clarke
Chief financial
officer
Alex Russo
(Starting in January 2014)
n More upmarket food range The investment in several premium food ranges has emphasised Asdas commitment to
enhancing its quality credentials ahead of the eventual economic upturn. It will invest 250m in quality, style and
service to retain and win customers as part of the five-year plan.
n Local supermarkets Bolstered by the Netto acquisition, there is a clear opportunity to establish a significant position
and proposition with a smaller supermarket price-oriented operation, offering a wider range than the smaller-format
hard discounters and other major players convenience stores.
n Online growth Asda has developed a successful store-based online food delivery operation and is well-placed to
develop its multichannel offer. It is now looking to extend its reach by increasing the number of collection points in
high-footfall locations such as stations.
n Commitment to expansion The group is committed to extending its store coverage from 53% of UK households in
2013 to 70% by 2018.
n George exploring international potential Georges international franchising programme accelerated in 2013, and
international delivery is now being made available in key European markets.
n Financial services Against an increasingly unfavourable background for the traditional banks, there is significant scope
to exploit the trusted Asda franchise and build up its embryonic financial services business.
n Social media focus Asda is involved with customers and local communities through the use of blogs and Twitter, which
help it develop new product ranges, for example. The Your Asda approach can help drive customer loyalty.
n Limited exposure to very large formats The fact that planning constraints have stymied development of the massive
Supercentre format can be viewed positively in light of changing shopping patterns.
Threats
n Management drain Asda has lost many senior managers to rivals and the stream of defections of key staff to Walmart
is of some concern. The departures of highly respected chief operating officer Judith McKenna and chief financial officer
Richard Mayfield in early 2014 will be a major blow.
n Industry over-capacity The grocers are increasing store capacity and Asda faces increased competition in its heartland
from Morrisons new store format and Tescos revived interest in customer service.
n Discounters The continued growth of Aldi, in particular, and the discount sector in general via the pound stores is a
threat to Asdas value reputation.
n Challenges of supermarket business Operating a small supermarket operation is a very different task from Asdas
traditional large-scale focus and the grocer is now running 40% more outlets since the Netto acquisition.
n Lack of convenience offer Being focused on value, Asda has eschewed the small c-store format up to now. The
decision on whether to move into this key growth area is only set to be taken towards the end of the five-year plan, which
could result in a lot of ground having to be made up.
www.retail-week.com
Retail Week 20
company snapshot
TESCO
Tesco has big
ambitions for
its F&F brand
and aims to
take on the
top high
street
fashion
retailers
Figures for year to February 2012

UK retail sales
42.8bn
UK profit
2.48m
UK stores
3,146
(February 2013,
includes Dobbies)
Employees
213,304
Gross margin (%)
(February 2013, full-time

employees only)
Sales growth
esco is the UKs leading grocer and the countrys largest retailer in
terms of sales. It has 3,114 grocery stores, of which 1,547 are
Express convenience shops a net gain of 120 stores during the
2013 financial year and 639 are One Stop convenience stores. Tesco also
sells clothing, household goods and furniture, electronics, software and
books.
The expanded retail services division comprises Tesco Bank which
the retailer has wholly owned since 2008 the UK Tesco telecoms
business, the online business and the consumer data subsidiary
Dunnhumby. Although Dunnhumby also has third-party clients, its work
with Tesco Clubcard has been instrumental in helping the grocer achieve
and retain its dominant UK market position. Tesco also owns the
Scotland-based Dobbies Garden Centres operation, which generated sales
of 137m in 2012/13 through its 32 UK stores.
In 2013 overall sales in the UK were up 1.8% to 43.6bn, but like-forlikes dipped 0.3%. The retailer performed strongly in food, but the
business conceded general merchandise continued to weigh on UK
performance in the year, with a fall in like-for-like sales of 5%. An
exception to this was the clothing brand F&F, which boosted sales by 9%
to exceed 1bn in the UK.
UK retail operating profit also fell 8.3% to 2.27bn. However, the
retailer said it had made significant progress with its Building a
Better Tesco plan, tackling its product and service offer and improving
the look and feel of certain stores. Under the scheme the business hired
8,000 new staff, and more than 250,000 staff received customer service
training. It also revamped more than 300 stores to give them a
more welcoming feel and improved presentation standards within
fresh food departments.
The acquisition of the Giraffe restaurant chain and investments in the
Harris + Hoole coffee shop business and upmarket Euphorium Bakery
have also enabled Tesco to make the larger stores more compelling retail
destinations for customers. As part of this goal, in November Tesco sublet space in its Newport Extra store to general merchandise retailer The
Original Factory Shop the first time the grocer has done such a thing.
In the first half of the 2014 financial year, Tesco said the response to its
overhauled Extra stores in Watford, Purley and Coventry had been very
positive, with more refits planned for the second half. During the period
UK sales were up 1%. However, they were down 0.5% on a like-for-like
basis as a result of the strategic shift away from selling consumer
electronics in-store and the ongoing transformation of its general
merchandise offer.
10
3
8
2009
2010
2011
2012
2013
2008
-1
-2
Sales change (%)
www.retail-week.com
Retail Week 21
company snapshot
TESCO
Tesco has big ambitions for its F&F brand and aims to take on the top
high street fashion retailers. The brand sells in 450 UK Tesco shops and 16
countries worldwide, and although Tesco does not have any plans at
present for UK standalone F&F stores, nearly 50 in-store clothing
departments were refitted during the first half of the 2014 financial year.
The refurbishments make F&Fs presence more distinct from the rest of
the store and give it an enhanced high street look. Since the revamps,
F&F has achieved a like-for-like sales uplift of more than 10%.
Overseas is also key for the brand, with Tesco recently expanding F&Fs
European franchise arm. It has opened two standalone stores, including its
first kids-only shop, in Gibraltar. It also opened seven concessions in Swiss
department store and hypermarket retailer Coop. F&F, which is currently
on sale across Europe, the Middle East and Asia, is also reviewing
European markets in which to launch a local transactional website next
year. Poland and the Czech Republic, which have fledgling standalone
F&F networks, are considered the most likely countries for this.
Meanwhile, the strategy of improving the Tesco grocery brands is
continuing in the 2014 financial year. For instance, the Tesco Finest range,
which was first introduced 15 years ago, relaunched in October, with
three-quarters of its 1,500 products either new or improved. Tesco has also
vowed to bring meat production closer to home and work more closely
with British farmers in response to the horse meat scandal.
Multichannel is also a priority. Tesco reported a strong online
performance, with group sales up 13% to more than 3bn (grocery and
general merchandise) for the first time in the 2013 financial year. The
business is the leading multichannel grocer by sales and is second only to
Amazon in terms of largest UK online retailer.
The grocery giant has proved itself to be an innovator in ecommerce.
For instance, it has more than 200 drive-thru click-and-collect modules in
store car parks, and in October it opened its sixth dedicated online store
dark store in Erith to support demand in Greater London. Tesco recently
began trialling same-day delivery for online groceries in Mansfield in
Nottinghamshire and is also seeking further locations for click-and-collect
on online groceries, with trials around the York area at a school, a park and
ride, and in office parks.
Tesco also has substantial international operations. Having built up an
extensive network of overseas stores from the mid-1990s, in 2013 the
group has some 3,650 stores in 11 countries across Europe and Asia.
However, the business recently offloaded its US Fresh & Easy operations
and withdrew from Japan, while its Chinese business is being recast as a
joint venture with China Resources. This will give Tesco a 20% stake in
the countrys largest retail business, with a combined total of more than
3,000 stores and a market-leading position in seven of the eight mostpopulous and affluent Chinese provinces.
www.retail-week.com
the strategy
of improving
the Tesco
grocery
brands is
continuing in
the 2014
financial
year
Market share
29.8%
(Kantar data, 12 weeks to

November 10, 2013)
UK online sales
2.8bn
(RWKB estimate)
Retail Week 22
SWOT analysis
TESCO
Strengths
n UK market leader Tesco is the UKs biggest retailer, dominating both the food and non-food markets.
n Online pioneer Tesco.com is also the market leader in online food. It has extended into online non-food through Tesco
Direct although less successfully while its enhanced multichannel capability and expertise is now being exported
into Tescos overseas operations.
n Strong convenience presence Tescos relentless build-up of smaller format stores has given it market-leading status in
the growth convenience sector. A late-2013 total of well over 2,000 c-stores (Express and One Stop) is four times higher
than Sainsburys current c-store total.
n Overseas presence Under former chief executive Sir Terry Leahy, Tesco built up a vast and highly profitable overseas
empire, stretching from South Korea and Malaysia to Hungary and Poland. However, elements of this notably the US,
Japan and China have proved a distraction of late and have been either sold or restructured.
n Clubcard The Tesco Clubcard is a valuable marketing and promotional tool which gives the company a major
competitive advantage in terms of customer insights.
n Diversification into banking and services Tesco has built a profitable services division. Initially focused on insurance
and telecoms, this has now extended into other financial services.
Weaknesses
n UK business neglected The UK business had suffered from under-investment under Sir Terry Leahy as profits were
milked to fund international expansion. As a result, the stores, product offer and service levels lagged behind those of
rivals. The Building a Better Tesco scheme is taking longer than expected to show results.
n Consumer backlash to market dominance Tesco had assumed the high ground of British retailing by outmanoeuvring competitors on most fronts, but consumer backlash to its dominant position has contributed to its market
share slipping since 2008.
n Online non-food Tesco has not managed to replicate its online food success in non-food, where operating losses still
persist. This is possibly a result of the heavy bias towards low-margin electricals, although this is being addressed.
n Property write-down Having built up an extensive freehold property portfolio and land bank, in 2012/13 Tesco
announced it would not be going ahead with the development of over 100 sites in light of changing consumer shopping
habits. This resulted in a one-off UK property write-down of 804m in that year.
n Management issues Tesco has lost a number of key executives across the UK business in recent years and, with the
group continuing to underperform, Philip Clarke remains under pressure going into 2014.
n Extra With customers increasingly shopping online for non-food, Tescos large-scale Extra stores (+70,000 sq ft) are
becoming increasingly unproductive.
Opportunities
n Increased services Surplus space in large stores is being used to enhance the service offer, with the introduction of
opticians, pharmacies and phone shops. Significant investment has also been made in restaurants (Giraffe), coffee
shops (Harris + Hoole) and artisan bakeries (Euphorium Bakery) to drive footfall. More space is also being allocated to
click-and-collect to drive multichannel sales.
KEY
PEOPLE
Non-executive
chairman
Sir Richard
Broadbent
Philip
Clarke
Laurie
McIlwee
n General merchandise strategy The general merchandise offer is shifting from low-margin, low-growth categories to
higher-growth, higher-margin categories that are more resilient (in terms of profitability) to transition online, such as
Home, Cook & Dine, Papershop and Celebration.
n Online potential International online development continues to offer significant potential while the UK infrastructure is
being developed to support increased demand for online food in Greater London, for example.
n Banking services Given the disenchantment of the UK public with the big banks, Tesco Bank plays an important role in
driving increased loyalty for the business and exploiting footfall in its stores. Its full range of banking products will be
completed in the first half of 2014/15 with the launch of current accounts.
n International development Change programmes are now in place across central Europe and Turkey and should start to
have a positive impact going into 2014 against weaker comparatives. If international sales densities can be brought
nearer UK levels, this would have a dramatic impact on group profits. The serially loss-making US and Japanese
businesses have now been sold, with the problematic Chinese operation recast as a joint venture.
Threats
n Competitive market Tesco appears to have lost its knack of staying ahead of the competition. As it tries to reposition
and catch up with what its rivals are doing in fresh food, Sainsburys, Asda and Morrisons are expanding and investing in
their own businesses. Meanwhile, it is under attack from the polarisation of UK food retailing, being squeezed by the
onslaught of Aldi and Lidl at the bottom end and a buoyant Waitrose at the top.
n Overseas issues Various governments have passed legislation to protect small local businesses from the expansion of
foreign supermarkets, meaning Tesco will have to tread carefully in those international markets.
n Continued underperformance Like-for-like sales have continued to fall in Tescos domestic and international markets in
2013/14, indicating that the business is not fully responding to the investment being thrown at it. Meanwhile, international
operations may have to run increasingly hard just to stand still in a tougher and more regulated economic climate.
www.retail-week.com
Retail Week 23

SWOT Report 2013

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Counting down from 10 to 1

Featuring in-depth Retail Week Knowledge Bank

Figures include both B&Q and

Gross margin (%)

ingfisher is the UKs leading DIY retailer. In the UK in late 2013

Sales change (%)

Group finance director

Figures for year to February 2012

UK sales change (%)

ome Retail Group owns high street and multichannel retailer

Sales change (%)

Group finance director

Figures for year to March 2012

(includes chemists and

(March 2013, UK chemist/

lliance Boots operates the UKs largest pharmacy chain in terms of

Sales change (%)

Group finance director

Figures for year to January 2012

(28,200 in department stores

UK sales change (%)

ohn Lewis Partnership (JLP) comprises the John Lewis department

Sales change (%)

Figures for year to January 2012

(includes food, retail

Gross margin (%)

he Co-operative Group operates the largest retailing components of

Sales change (%)

Group chief financial

Figures for year to March 2012

Sales change (%)

Chief financial officer

Figures for year to January 2012

Gross margin (%)

orrisons is the UKs fourth-largest supermarket group in terms

Sales change (%)

Group finance director

Figures for year to March 2012

Gross margin (%)

Sales change (%)

Chief financial officer

Figures for year to December 2012

Gross margin (%)

sda is the UKs second-largest retailer in terms of sales, with a

Sales change (%)

Figures for year to February 2012

Gross margin (%)

(February 2013, full-time

Sales change (%)

(Kantar data, 12 weeks to

Group chief executive

Chief financial officer

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