How does Tesco do it?

Keep on increasing its sales and profits in the teeth of a savage recession that is.

Well Tesco boss Sir Terry Leahy likes to present himself as a simple lad from Liverpool and his strategy is certainly straightforward: Tesco does everything everywhere.

But the company’s results for 2009 – profits up ten per cent to £3.18bn on an 8.5 per cent sales increase – also appear to indicate that the UK started to claw its way out of recession rather earlier than the official figures show. According to these the economy was still contracting in the third quarter of last year even though many analysts, including the redoubtable Jim O’Neill at Goldman Sachs, thought the corner had been turned.

This also seems to be the message from Associated British Foods, the Weston family firm that owns value clothes retailer Primark. Primark almost doubled profits in the half year to the end of February, to £330m, on sales up 19 per cent to £1.3bn.

Now if the economy was still contracting at the start of this period the sales of both these companies must, surely, have come from their rivals but there’s no evidence of any of these taking a powder. Even Marks & Spencer, which competes with both with the added disadvantage of higher prices, appears to be over the worst.

The mighty Tesco is showing the benefit of expanding into other countries (mittel Europe, the Far East and the US) and we wait to see if its aggressive moves into banking (it’s going to offer mortgages later this year) and telecoms (you can now get an iPhone from Tesco on a 12-month contract) show the same success.

As for ABF, although it’s a quoted company, surely no business without a big family influence would have been allowed by shareholders to diversify from commodity foods into discount high street retailing. But it’s clearly worked.

Sir Terry was on the airwaves this morning, declining to be dragged in to the row over National Insurance increases. Even so his message was clear: the Government needs to raise revenue to plug the hole in its finances so companies should get on with it. He’s still planning to create 16,000 jobs this year.

A knighthood clearly isn’t sufficient for this man. He should be dubbed the Earl of Cheshunt forthwith.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.

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