C1 - Tesco PLC (2004) - A

C1 - Tesco PLC (2004) - A - RSM Erasmus University Erasmus...

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RSM Erasmus University Erasmus University Rotterdam RSM-F-0501 TESCO PLC (2004) - A Mike Page prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. Names and other identifying information may have been disguised to protect confidentiality. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of the authors. Copyright © 2005, Rotterdam School of Management BV Version (1.0) 2005-10-01 Richard Calvert’s telephone started ringing at 6:30pm on Friday 23 January 2004 just has he was about leave the office and, for a moment, he contemplated ignoring it. However, the glances directed his way from a number of his fellow company analysts suggested this would be an unwise decision. With a silent sigh that reflected the certainty that he felt about the inevitable loss of a long-planned skiing weekend with friends, he picked up the telephone. “Richard, I need you to do a comprehensive analysis of Tesco PLC for me and have it on my desk by Monday morning before the market opens. Our exposure to the retail sector in the house balanced fund needs urgent adjustment and I want to make a decision about whether to adjust our Tesco holdings before the market opens and any new analysis reports from the brokerage firms hit the Street!” Having had his worst fears realized, Richard replaced the receiver and wondered why he had decided on a career in the investment world? As importantly, he wondered how he had been unlucky enough to get Mike Page as his senior portfolio manager? HISTORY OF TESCO PLC 1 Sir Jack Cohen founded Tesco PLC in 1924. The seeds of the firm began in 1919 when he using his First World War army gratuity to finance selling groceries in London’s East End markets although the Tesco brand name only appeared in the late 1920s when he combined the first two letters of his surname with the initials of a tea supplier partners – T.E. Stockwell. Since the opening of the first Tesco store in 1929 in Burnt Oak, Edgeware, the firm has grown to be Britain’s leading food retailer. In 1947, after the Second World War, Tesco Stores (Holdings) Ltd was floated on the London Stock Exchange, with an initial share price of 25p. The listing just preceded the introduction of first Tesco self-service store in St Albans in 1948 and the first self service supermarket was opened in a converted cinema in Maldon in 1956. By the early 1960s, Tesco had become a familiar name. As well as groceries, the stores sold fresh food, clothing and household goods. Tesco stores were located in the high streets of many towns. The Tesco store that opened in Leicester in 1961 had 16,500 square feet of selling space and went into the Guinness Book of Records as the largest store in Europe. By buying in bulk and keeping costs down, Tesco should have been able to sell at very competitive prices to its
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C1 - Tesco PLC (2004) - A - RSM Erasmus University Erasmus...

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