Tesco ready for the economic storm

published 3 October 2008

Every little helps. But as its UK sales, excluding fuel, nudged up 3.7%, even the mighty Tesco (LON:TSCO) admitted that it "hasn't been easy" to ring up an 11% first-half profit rise. And the retailer faces "powerful economic headwinds", said chief executive Sir Terry Leahy, with the current need "to help the customer to spend less, it's no use trying to make them spend more".

Still, the recently launched range of exclusive cheap brands has been well received and now makes Tesco a bigger UK discounter than Aldi, noted Maggie Urry in the FT. Tesco "is hunkering down", said Rachel Sanderson in Breakingviews, and its "march across countries, products and price points should help it to weather the worsening economic storm" too. International expansion is going well, with profits excluding the US start-up rising by 30% over the past half year.

What's more, the company is also prepared to boldly go where others have recently fallen, "planning an assault on Britain's crisis-ridden banking industry" by launching mortgages and current accounts, said Steve Hawkes in The Times. A potential difficulty ahead is a major supermarket price war amid an economic slump, said Lex in the FT. But its "size and marketing and retail execution skills should help it weather even that".