Philip ClarkeRoadmap to Returns

Four part strategy

• Core UK• Non-food• Retailing services• International

“Through period of greatest risk”

• Doing well• In 12 countries• Market leading in 5• Good stores & locations

Roadmap to returns

FIND THE RIGHT BUSINESS

GROW THE BUSINESS

BUILD CAPABILITY FORFUTURE GROWTH

Finding the right business

• Key criteria for entry:– Under-developed retail sector– Customers with spending power– Opportunity for market growth– Potential for market leadership

• Understand what we can bring

Local businesses

• Local Businesses- local customers- local managers

• One size does not fit all

Core Purpose and Values

• Core Purpose- Create value for customers to earn

their lifetime loyalty

• Values- No-one tries harder for customers- Treat people how we like to be treated

GROWTH- New Stores- New Formats- Like for Like

Growth and capability

CAPABILITY - People - Processes - Systems

&

Growth profile

•Entry•Rapid growth•Established markets

Growth - Market Entry, Hypermarkets

Blocking of NonFood/Fresh Food/ATG

Ambient

Clothing

Checkouts

DIY

ShoesClothing

Ch

illed

ProduceH

ealt

h &

Bea

utyHousewares

Entertainmentand Leisure

AllElectrical

Ambient

Bab

y

FishM

eat

HomeFurnishing

andFurniture

ClothingBWS Home

FurnishingBakeryMeat CoffeeDeli

Food CourtSeating

CSD

Lettable Area

Trolleys

Lettable Area Lettable Area

Lettable Area

Fish

Sport

Toys

Promotion

Trolleys

NFFFATG

Growth - Hypermarket Footprint

Korea11.5Kblueprint

Stationery

Ho

use

war

es

Sh

oes

Kid

s C

loth

ing

Hea

lth

&B

eau

tyAmbient P

et

Clu

bP

ack

Men

s C

loth

ing

WomensClothing

Bab

y

No

n F

oo

dG

roce

ry

Checkouts

ChilledRic

e

Pro

du

ce

Eggs

Nu

ts P

ickl

es

Tea

Co

ffee

j

uic

e

Mea

tB

ever

ages

Eg

gs

BWS Non Halal

BakeryThai DeliSushi Nappies

Housewares

White Goods

Small Elec

ElectricalNew Tech

Bedding

Furniture

Home Furnishing

Lighting

DIY / Car

Toys

Sport

CSDLettableArea

Trolleys

LettableArea

Lettable Area

FoodCourt

NFATG

FF

Blocking of NonFood/Fresh Food/ATG

Malaysia10Kblueprint

Growth - Hypermarket Footprint

Europe3kblueprint

Seasonal

Stationery

BrownGoods

Home Tex.

CSD

DIY/CarToys

Clothing

Fro

zen

Hea

lth

&B

eau

ty

No

n F

oo

dG

roce

ry

Pro

du

ceAmbient

BW

S

NewsCheckouts

Pet

Lettable Area

Deli/Cheese Meat Baby

Ch

ill M

eat/

Del

i

Hot Food

Action Alley

Checkout Aisle

Po

wer

Ais

le

Books

CD/Video

Homeshop

Home Textiles

Sport

Ch

ille

d D

airy

NF Grocery ClothingNews

Ambient

Bakery

Store Blocked NonFood/Fresh Food/ATG

ATG

FF

NF

Growth - Hypermarket Footprint

Growth - Critical Mass

• 10-15 Hypermarkets• Centralised supply chain

- Improve product quality- Increase productivity- Introduce own label- Improve margin

Growth - new formats

• Site research / site acquisition• Hypermarket flexibility

Growth - new formats

• Compact Hypermarkets

Growth - new formats

• Convenience Stores

Growth - new formats

• Discount Supermarkets

Growth - build cost

• Lower cost stores• Leasehold / Freehold flexibility• Build for less

Growth profile

•Entry•Rapid growth•Established markets

Growth - Tesco shopping trip

• The prices are right• I can get what I want• I don’t queue• The staff are great• Shopping is easy and enjoyable

PEOPLE

Capability

&PROCESSES SYSTEMS

Capability - People

• Local management• Focus on store operations &

commercial• Keep the pipeline full

Capability - Processes & Systems

• International Support Office• Develop once, use many

- Availability- Buying- Price- Formats

Capability - Processes & Systems

• Tesco in a box• Retek in Korea• Whole package in Turkey

Capability - Simplicity & Excellence

• Share learning• Develop capability• Business process excellence• Shared systems & platforms

Where are the countries?

• Established markets- Thailand, Korea, Hungary, Ireland, Slovakia

• Rapid growth- Malaysia, Taiwan, Czech Republic, Poland

• Entry- Japan, Turkey, China

Returns - CROI Development

0%

5%

10%

15%

20%

2004

TotalInternational

All StoresLead Countries

LFL StoresLead Countries

CROI Development

0%

5%

10%

15%

2001 2004

Total International

Lead Countries