Tesco Plc · LSE:TSCO
Tesco — Investor Day (February 2014)
92 slides from Tesco's investor day presentation, Feb 25, 2014
Slide 1: Winning in the new era of retail
= @ 12:00 Winning in the new era of retail 25 February 2014
Slide 2: Winning in the new era of retail
Winning in the new era of retail • Retail world is transforming more quickly than ever before • Current challenges, long-term opportunities • Tesco is uniquely placed to lead – Sustainable, competitive advantages built up over many decades – Anticipated the change – strong positions in convenience,
Slide 3: An unrivalled family of brands
An unrivalled family of brands The most compelling offer for our customers Third party marketplace 2
Slide 4: Customer loyalty will be even more important in the new era
Customer loyalty will be even more important in the new era 3
Slide 5: What does Tesco stand for?
What does Tesco stand for? • For everyone: – Delighting customers – whoever, wherever, whenever – Outstanding value – unique ability to understand each individual’s needs – Ease and simplicity – Everyday needs met like no-one else can • Most tailored and personalised offer • To be loved by customers
Slide 6: What's changing?
What’s changing? • Accelerating growth in new channels – Investing to ensure we emerge as winners in the new era • Allocating sufficient resources to deliver the most compelling customer offer today – Sharper prices, improved quality, stronger ranges, better service – Going faster with large-store r
Slide 7: Christmas highlighted the trends within the industry
Christmas highlighted the trends within the industry Blinkbox Consumer-driven trends +245% Online clothing +70% Strong growth in online – Rapid online migration now a mainstream consumer trend – Customers increasingly blurring boundaries between online and Online general offline +25% merchandise – S
Slide 8: These consumer trends have been building for some time
These consumer trends have been building for some time Two year sales growth – Kantar 4 week data Consumer-driven trends Strong growth in online – Rapid online migration now a mainstream consumer trend – Customers increasingly blurring boundaries between online and offline – Smartphone and tablet pe
Slide 9: We have a high level of exposure to larger stores
We have a high level of exposure to larger stores % of retailer space by store size • More than half of our space is in (excluding stores <10,000 sq ft) large stores 10-30k 30-50k 50-70k >70k sq ft sq ft sq ft sq ft • Exposure compounded by Tesco 20% 24% 27% 29% existing space allocation Competitor
Slide 10: We have been clear about what we need to do for some time
We have been clear about what we need to do for some time – Sharper prices, improved quality, stronger ranges, better service – A focus on building customer loyalty – The reinvention of our large store formats – The transformation of non-food – first Clothing and now GM – Convenience stores tailored
Slide 11: We leverage our skill and our scale in ways others cannot
We leverage our skill and our scale in ways others cannot • Global sourcing scale • World-class supply chain and logistics • Strong people, processes and systems • Great store locations, multiple formats • Profitable online grocery business • Strong own-brands and services • Unrivalled customer insi
Slide 12: We will accelerate our rate of leverage with our new capabilities
We will accelerate our rate of leverage with our new capabilities • Global sourcing scale • Most compelling offer for our customers in • World-class supply chain and logistics the multichannel era • Strong people, processes and systems • Differentiated, added-value services across • Great store loca
Slide 13: All underpinned by our focus on the most compelling offer for customers
All underpinned by our focus on the most compelling offer for customers • Global sourcing scale • Most compelling offer for our customers in • World-class supply chain and logistics the multichannel era • Strong people, processes and systems • Differentiated, added-value services across • Great stor
Slide 14: We have already taken important steps
We have already taken important steps • Improvements across the offer under Building a Better Tesco plan • Already reduced our investment in new space – From 2.5m sq ft per year at peak to c.1.4m sq ft in 2013/14* • Transformed F&F • Started our GM transformation programme • Developed, trialled and
Slide 15: Customers are yet to feel the benefits of the emerging recovery
Customers are yet to feel the benefits of the emerging recovery Growth in income and expenditure 5.5% Net • Squeeze on discretionary income 5.0% income continues and will remain 4.5% Essential spending % change 4.0% – Increasing cost of housing, especially 3.5% utilities, means essential spending 3.
Slide 16: The UK market is more competitive
The UK market is more competitive UK market share 1992 to 2013 • Increased promotional intensity 35.0 Tesco c.30% (+14) • Proliferation of price-led marketing 30.0 • Continued space growth 25.0 • Rapid growth and new entrants in convenience and online grocery Market share (%) 20.0 Asda c.17% (+8) •
Slide 17: Uncertainties about the future remain
Uncertainties about the future remain • Consumers are yet to benefit from the emerging economic recovery • The pace of transition of consumers to online is still unclear • The industry will remain intensely competitive 16
Slide 18: We are going to lead the industry
We are going to lead the industry • We are focused on delivering the most compelling customer offer • We are retaining the flexibility to act accordingly • Having tested the ingredients, we are going faster • We are spending much less on new space – Group-wide capex ≤ £2.5bn for at least three years
Slide 19: We are moving from a first curve to a second curve
We are moving from a first curve to a second curve New, differentiated brands and services Pioneered home shopping Bricks & Strong own-brands Build advocacy through content Mortar Personalisation Invested in stores Launched Bricks & Clubcard Accessible Clicks everywhere 18
Slide 20: How businesses bridge the gap between the first and second curve is crucial
How businesses bridge the gap between the first and second curve is crucial Multichannel Reinvent Tactical changes Tactical changes Do nothing 19
Slide 21: Our strategic priorities remain the same
Our strategic priorities remain the same 20
Slide 22: Continuing to invest in a strong UK business
CONTINUING TO INVEST IN A STRONG UK BUSINESS 21
Slide 23: What does Tesco need to win?
What does Tesco need to win? Sharper prices, Differentiated, improved quality, added-value stronger ranges, products and better service services Large stores Continued that are worth leadership in the trip convenience and online 22
Slide 24: What does Tesco need to win?
What does Tesco need to win? Sharper prices, Differentiated, improved quality, added-value stronger ranges, products and better service services Seamless multichannel offer Large stores Continued that are worth leadership in the trip convenience and online 23
Slide 25: We began our journey to Build a Better Tesco in 2012
We began our journey to Build a Better Tesco in 2012 Service & Staff Stores & Formats Price & Value Range & Quality Brand & Marketing Clicks & Bricks 24
Slide 26: Strengthening the foundations: Service & Staff
Strengthening the foundations Service & Staff • Invested £200m in additional hours in 12/13 • Making Moments Matter – over 250,000 colleagues helped to give great service • Right hours, right place – we have moved over 300,000 hours in last 12 months • +40% increase in proportion of customers rating
Slide 27: Strengthening the foundations: Stores & Formats
Strengthening the foundations Stores & Formats • Over a third of our estate has benefited from refresh programme in last two years • Positive customer response • Sales, profit and margin ahead of equivalent non-refreshed stores • Developed and tested ‘ingredients’ for reinventing large stores across
Slide 28: Strengthening the foundations: Price & Value
Strengthening the foundations Price & Value Price matching/beating vs competitors • A new price approach – trusted, Price Promise stable, logical and competitive launched % excellent / very good • Reduced price errors by >50% • Launched Price Promise • Driven improvements in all Jun-12 Oct-12 Jan-13
Slide 29: Strengthening the foundations: Range & Quality
Strengthening the foundations Range & Quality • Materially improved 8,000 products in our core Tesco range • Re-launched ranges – Everyday Value, finest*, Healthy Living • Introduced industry-leading authenticity tests • Fresh quality perception improved by over 6% • Awarded Quality Food Awards Reta
Slide 30: Strengthening the foundations: Brand & Marketing
Strengthening the foundations Brand & Marketing 29
Slide 31: Strengthening the foundations: Brand & Marketing
Strengthening the foundations Brand & Marketing • Food back at the heart of our communications • Love Every Mouthful • More value delivered to customers through Clubcard – Clubcard Boost and personalised couponing – Customer ratings up 6% 30
Slide 32: Strengthening the foundations: Brand & Marketing
Strengthening the foundations Brand & Marketing • Food back at the heart of our communications • Love Every Mouthful • More value delivered to customers through Clubcard – Clubcard Boost and personalised couponing – Customer ratings up 6% • Playing an important role in communities 31
Slide 33: Strengthening the foundations: Clicks & Bricks
Strengthening the foundations Clicks & Bricks • Grown online grocery share from strong lead • Strengthened grocery home shopping offer – Over 190,000 Delivery Saver subscribers – One-hour delivery slots across 98% of the UK – Grocery Click & Collect in 232 locations • Stabilised online general merch
Slide 34: We have achieved this thanks to the efforts of our 300,000 colleagues
We have achieved this thanks to the efforts of our 300,000 colleagues 33
Slide 35: Accelerating our plans to deliver the most compelling offer for customers
Accelerating our plans Accelerating our plans to deliver the most compelling offer for customers 1 Every day low prices on the lines that matter most 2 Product innovation and quality that delights 3 Leading on service 4 Inspiring general merchandise ranges 5 The best, most relevant convenience retai
Slide 36: Every day low prices on the lines that matter most
Accelerating our plans 1 2 3 4 5 6 7 Every day low prices on the lines that matter most • We can do more to drive a change • Lower, more stable prices • Genuine deals that customers trust 35
Slide 37: Every day low prices on the lines that matter most
Accelerating our plans 1 2 3 4 5 6 7 Every day low prices on the lines that matter most • Additional incremental investment of £200m 36
Slide 38: Every day low prices on the lines that matter most
Accelerating our plans 1 2 3 4 5 6 7 Every day low prices on the lines that matter most • Additional incremental investment of £200m • Price Promise will continue to reassure 37
Slide 39: Product innovation and quality that delights
Accelerating our plans 1 2 3 4 5 6 7 Product innovation and quality that delights • New product development back to the fore • Produce category review underway – specifications, quality, taste • Making convenience food ranges an even stronger point of differentiation • Anticipating emerging trends –
Slide 40: Leading on service
Accelerating our plans 1 2 3 4 5 6 7 Leading on service • Further productivity improvements to free up more colleagues to serve customers in-store • Prioritising fresh food departments – Ambition to have the best butchers, fishmongers and produce experts • Focusing on in-store service points and cus
Slide 41: Inspiring general merchandise ranges
Accelerating our plans 1 2 3 4 5 6 7 Inspiring general merchandise ranges • Anchored around family, food, cooking and home • Rolling out across store estate and online • Starting with Spring/Summer 2014 launch • New products, new packaging, new merchandising • Range transformation due to be complete
Slide 42: Inspiring general merchandise ranges
Accelerating our plans 1 2 3 4 5 6 7 Inspiring general merchandise ranges • Anchored around family, food, cooking and home • Rolling out across store estate and online • Starting with Spring/Summer 2014 launch • New products, new packaging, new merchandising • Range transformation due to be complete
Slide 43: The best, most relevant convenience retailer in town
Accelerating our plans 1 2 3 4 5 6 7 The best, most relevant convenience retailer in town • Drive growth in convenience – around 150 stores per year • Meeting local customers’ needs and shopping missions better than anyone • Tailored ranges introduced into every Express store already • Continuous ra
Slide 44: Destination stores that are worth the trip
Accelerating our plans 1 2 3 4 5 6 7 Destination stores that are worth the trip • Bringing the best of Tesco to our largest stores • Every location reviewed • Missions and propositions approach • Tailoring offer, range and layout for individual stores • Rolling out relevant ‘ingredients’, creating c
Slide 45: 44
44
Slide 46: Worth the trip
Worth the trip 45
Slide 47: 46
46
Slide 48: 47
47
Slide 49: 48
48
Slide 50: 49
49
Slide 51: 50
50
Slide 52: Destination stores that are worth the trip
Accelerating our plans 1 2 3 4 5 6 7 Destination stores that are worth the trip To date^ Refresh roll-out Format Total number Refresh 14/15 Ongoing per of stores* stores year Extra 247 82 c.110 c.60 Superstore 482 178 c.50 c.100 Metro 195 46 c.40 c.50 Express 1,672 309 c.450 c.375 Capex c.£400m c.£5
Slide 53: Exceptional value for customers delivered through Clubcard
Accelerating our plans 1 2 3 4 5 6 7 Exceptional value for customers delivered through Clubcard • The best offers, prices and deals • Personalised better than anyone • Strengthening partner relationships • Putting customers more in control • Clubcard – a common currency across all of our brands and
Slide 54: Exceptional value for customers delivered through Clubcard
Accelerating our plans 1 2 3 4 5 6 7 Exceptional value for customers delivered through Clubcard 53
Slide 55: Helping to fund our accelerated customer improvements
Helping to fund our accelerated customer improvements • Reshaping our promotions • Accelerated global sourcing – £75m extra savings in 2014 • Technology-led productivity – Voice-guided picking in DCs – Latest generation dotcom centre automation – Further roll out of Scan as You Shop • Replenishment
Slide 56: Tesco in the UK
Tesco in the UK The most compelling offer for our customers Third party marketplace 55
Slide 57: Establishing multichannel leadership
ESTABLISHING MULTICHANNEL LEADERSHIP 56
Slide 58: Christmas highlighted the trends within the industry
Christmas highlighted the trends within the industry Blinkbox Consumer-driven trends +245% Online clothing +70% Strong growth in online – Rapid online migration now a mainstream consumer trend – Customers increasingly blurring boundaries between online and Online general offline +25% merchandise – S
Slide 59: We are moving from a first curve to a second curve
We are moving from a first curve to a second curve New, differentiated brands and services Pioneered home shopping Bricks & Strong own-brands Build advocacy through content Mortar Personalisation Invested in stores Launched Bricks & Clubcard Accessible Clicks everywhere 58
Slide 60: What is multichannel?
Transactional (online) Digital Non- transactional What is multichannel? Multichannel Transactional Physical Non- transactional 59
Slide 61: What is multichannel?
What is multichannel? Putting customers at the heart of our business Seamless customer experience 60
Slide 62: Consumer trends are moving rapidly towards multichannel
Consumer trends are moving rapidly towards multichannel 1 2 3 Need for a Online Blurring seamless migration boundaries experience Online share of category (%) UK household tablet penetration and smartphone population penetration (%) 2008 2013 2018 73 70 60 Tablet Smartphone 53 43 49 47 40 29 22 19 2
Slide 63: Customers value retailers who get it right
Customers value retailers who get it right 2.98x Average Annual Spend with Tesco 4% of customer count 2.04x +17% customer growth* Similar growth across all affluences* In-store only Instore Only In-store Instore++online grocery Food Online Instore + Food In-store Onlinegrocery + online + Non-Food +
Slide 64: What might it look like?
What might it look like? (1) Browsing for ideas (2) Writing a list (3) Collecting the order Lia arrives at her local store. Her order Lia would like a few additional products which she wants to choose herself. Lia finds a recipe she likes and adds all the has been pre-picked and is ready to go strai
Slide 65: The future is closer than you think
The future is closer than you think 64
Slide 66: We have created the building blocks for multichannel over the last decade
We have created the building blocks for multichannel over the last decade Strong store locations Clubcard Grocery home shopping General merchandise online Clothing online Tesco Bank and Tesco Mobile Digital capabilities Devices 65
Slide 67: We have created the building blocks for multichannel over the last decade
We have created the building blocks for multichannel over the last decade Strong store locations Clubcard - Over 3,300 touch points with customers - 43 million Clubcard customers around the world - Multiple formats accessing all parts of the community - dunnhumby – 2,500 colleagues, 60 clients, 17 o
Slide 68: Grocery home shopping
Grocery home shopping • 17 years’ experience • Highly efficient picking model • Excellent drop densities, 300 locations • £2.5bn sales • £127m trading profit – All direct costs fully-charged • Increasing focus on customer profitability, rather than channel profitability • New measures, new KPIs, new
Slide 69: We have ambitious goals
We have ambitious goals One hour Tesco delivery slots and for every ‘Sellers at product Tesco’ For Even more 100% of Click & Collect the UK locations 68
Slide 70: A bold plan for 2014
A bold plan for 2014 SHARPER PRICES Market-leading delivery pricing Free Click & Collect – including Grocery Delivery Saver guarantee Added-value subscriptions BETTER SERVICE Twice the number of Click & Collect locations Alternative Click & Collect locations ADDED-VALUE PRODUCTS AND SERVICES Current
Slide 71: Connected devices are an essential ingredient
Connected devices are an essential ingredient • Making tablets accessible to all • Benchmarked against the best • Open platform: access to over 1 million apps • Fastest-selling tablet at Tesco • Two years’ extensive research and development • Catapult for Tesco online and digital Tesco tablet sales
Slide 72: Accelerating our efforts to create a seamless, end-to-end customer experience
Accelerating our efforts to create a seamless, end-to-end customer experience The most compelling offer for our customers Third party marketplace 71
Slide 73: Winning in the new era of retail
WINNING IN THE NEW ERA OF RETAIL
Slide 74: Tesco has changed
Tesco has changed £6.6bn Capital expenditure £2.5bn 2008/09 2013/14 2014/15 73
Slide 75: Tesco has changed
Tesco has changed 11.5m 12 sq ft Group net new space – m sq ft 10 8 6 3.8m 4 sq ft* 2 0 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 *2013/14 Group net new space forecast as per Interim Results 2013/14 Additional Information pack. 74
Slide 76: Tesco has changed
Tesco has changed 2008/09 New space Plus over 700 One Stop stores Large store Almost Convenience +70% 1,700 Number of UK Express Express stores 2013/14 New space 961 Express Large store Convenience Dotcom grocery Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 75
Slide 77: Tesco has changed
Tesco has changed 17 years Over 230 Over 1,750 locations locations 76
Slide 78: Tesco has changed
Tesco has changed 2010 TESCO a a a a
Slide 79: Tesco is more focused
Tesco is more focused 2014 78
Slide 80: Tesco is more focused
Tesco is more focused 2014 79
Slide 81: Tesco is more focused
Tesco is more focused 2014 s . an . a
Slide 82: Financial framework remains appropriate for the medium term
Financial framework remains appropriate for the medium term 81
Slide 83: Financial framework remains appropriate for the medium term
Financial framework remains appropriate for the medium term • Committed to achieving the guiderails in the medium term • Prioritising delivery of the most compelling offer for customers – Accelerating investment in the customer offer and growth in new channels – Focused on increasing customer loyalt
Slide 84: We are reducing capex to £2.5bn for at least three years
We are reducing capex to £2.5bn for at least three years Capex (£bn) 4.7 3.7 3.8 3.1 3.0 no more than £2.5bn 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 Allocate capital within range No more than £2.5bn capital of 4% down to 3.5% of sales expenditure 83
Slide 85: We are reducing capex to £2.5bn for at least three years
We are reducing capex to £2.5bn for at least three years 5 4.5 4 3.5 • Reduced new space growth 3 • Little new 2.5 investment in Europe 2 NewNew stores stores • Focus on high 1.5 Technology returning Technology 1 investments in Refresh Korea, Malaysia Existing 0.5 Maintenance stores and Thailand and
Slide 86: A transitional period
A transitional period • Lower-growth environment • Acceleration of our plans – continuing to invest • Customer focus will drive top-line growth over the longer term • £ not % is the measure of margin success • Delivering for customers will be the driver of future returns 85
Slide 87: Looking further ahead
Looking further ahead • Efficiency and scale advantages • New opportunities to serve customers • New infrastructure and capabilities • Valuable digital and physical assets • Further differentiation for customers Winners in the new era will generate healthy returns 86
Slide 88: Winning in the new era of retail
WINNING IN THE NEW ERA OF RETAIL
Slide 89: Most compelling offer for customers
Most compelling offer for customers • A strong plan – some of which you have seen today • More focused than ever on the most compelling offer • Uncertainties about the future environment remain • Retaining the flexibility to act accordingly 88
Slide 90: Tesco in the new era
Tesco in the new era • Excited about the future • Unique capabilities will allow us to lead • As ever, for everyone • Outstanding value • Meeting everyday needs, better than anyone 89
Slide 91: Q&A
Q&A TESCO
Slide 92: Disclaimer
Disclaimer This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipa