Tesco to roll out record sales

By Clare Matheson
Business reporter, BBC News

Analysts will be keen to hear how the group is doing in Eastern Europe

Supermarket giant Tesco is expected to make history again when it unveils its full year results - revealing it has broken through the £1bn-a-week sales barrier.

But the total global sales figure is set to be just one in a list of headline-grabbing numbers.

Pre-tax profits are widely expected to come in at a record £3bn and turnover is set to rise to £53bn, from £52bn last year.

So with many companies bemoaning the state of the global economy for dwindling profits and stalling growth, how has Tesco managed to remain such a juggernaut in the retail world?

Analysts claim the group has a knack of spotting new sales trends.

New markets

It was one of the first supermarket groups to exploit the convenience store format - popular with the cash-rich, time-poor set who seek the closest outlet.

Tesco has also made the most of its move into non-food - which offers higher prices and higher margins - overtaking department stores and Marks and Spencer a number of years ago.

TESCO FACTS Third biggest retailer in world, UK's biggest Has an outlet in every postcode in the UK 14 years ago it overtook Sainsbury's as the UK's largest supermarket This year marks 30 years since Tesco broke through the £1bn-a-year sales mark In the UK it has 2,115 stores and 280,000 members of staff

And Tesco has not just settled on holding on to its top spot in the UK market.

In recent years, it has begun to set its sights on overseas growth and now employs 440,000 staff in about 4,000 stores across 14 countries.

Such has been the success of its plan that last year, more than half of its profit growth came from foreign stores.

However, experts are aware this strategy could prove to be problematic in future - particularly given the current global economic squeeze.

So the experts will be keenly watching its performance in challenged economies such as the Republic of Ireland, Hungary and Turkey.

And the overseas drive has not been without hiccups. Tesco's expansion of its Fresh & Easy brand was temporarily put on hold last year, so analysts will be keen to know whether the brand will break even by the end of the current financial year.

Foreign shores are not the only potential pitfalls facing the firm.

Discounts

At home, cut price rivals such as Aldi and Lidl have been eating into the grocery market, gaining in popularity as middle-class shoppers trade down to save money during the credit crunch.

At Aldi, the trend translated into a 26% jump in sales last year. In fact, the German retailer is enjoying such popularity in the UK that it plans to boost its number of stores by 50 to almost 500 this year.

In an effort to take the sting out of this attack - and make the most of a burgeoning trend - Tesco launched its own brand of cut-price goods in September.

Meanwhile, commentators have raised concerns about the group's debt, suggesting it could reach £10bn on the back of the weak pound, a recent acquisition in South Korea and its decision to buy out its financial services partner RBS for £950m.

In an effort to reduce this burden, many believe Tesco chief Terry Leahy could announce measures to cut spending from £4.5bn to nearer the £3bn-3.5bn mark.

Questions may also be asked about whether the group is sensible to decide to fully enter the finance arena by rolling out its banking format across a number of stores - just as the recession tightens its grip.

Growth

But as the figures roll out on Tuesday, one of the main issues that analysts and reporters alike are set to examine is the group's ever increasing hold on the UK retail market.

Despite the recession, as the forecasts show, Tesco is continuing to grow in the UK - albeit at a slower rate.

Tesco has made the most of its non-food offering

Even Competition Commission measures to curb the the power of major supermarkets were halted by Tesco earlier this year when it won its appeal against a so-called "competition test" that was set to be introduced for planning applications.

The win was good news for Tesco, which controls far more undeveloped sites for new stores than its competitors.

Tesco's seemingly unstoppable rise has prompted widespread outrage from smaller, weaker competitors, who claim they are being forced out of the market to consumers opposed to its mounting presence in and out of towns.

And Tuesday's figures are unlikely to ease the concerns of these groups.