Tesco PLC

1
Tesco PLC

• An Investment Opportunity
• BUY

Group One Scott Baker Michael Raupp
Joe Sicilian
2
Bear Story

• Focusing on global expansion efforts will
  distract Tesco from their core U.K. market.
• If the expansion into the West Coast of the
  United States is unsuccessful, Tesco's growth
  opportunities will be lessened considerably.

3
Reasons to Buy

• Tescos commitment to grow their home market in
  the U.K. will lead to increased profitability in
  the U.K.
• The expansion plan that Tesco has will help them
  move into new markets worldwide and increase
  their share in the markets they are in now.
• Currently, there is a great opportunity to buy
  Tesco because of their superior convenience store
  model, proven in the UK, and is about to invade
  the West Coast of the United States.

4
Company Profile

• Founded as a grocery operation in 1920s
• Grown up from there into more retail
• 4 Store Formats
• Tesco Express
• Tesco Metro
• Tesco Superstore
• Tesco Extra

5
Company Strategy

• Maintain a strong core U.K. business
• 1,800 stores80 of total profit
• Wide selection of products
• Fair pricing
• Become an international retailer
• 11 Other Markets in Europe and Asia
• Coming to U.S. in 2007
• Cater to the local market very well

6
Company Strategy

• Be as strong in food as in non-food
• Currently only have 7 of non-food market
• Variety of Products
• 1 in 7 customers have purchased clothing
• Develop Retailing Service
• Tesco Personal Finance
• Tesco.com
• Music store, cell phones, internet phone, etc.

7
Competitors

• In the UK
• ASDA (Wal-Mart)
• J. Sainsbury
• Wm. Morrison Supermarkets

• In the US
• Wal-Mart
• Kroger
• Safeway
• 7-Eleven

8
Potential in the U.S. Market

• Currently grocery store OR convenience store.
• Needs of the consumer.
• Proven success in Europe.
• Potential in the West Coast as entry point.

9
U.S. Invasion Strategy

• Enter through the West Coast in 2007.
• Opened headquarters this last Monday in CA.
• Distribution plants in CA, NV, and AZ.
• Take consumers from both grocery stores and
  convenience stores.
• Use economies of scale to keep prices low.

10
Valuation Highlights

• WACC 10.76
• PV of Terminal Value 31,975M

11
Beta EstimateWith future valuations make sure to
run an up to date regressionOur Current Estimate
is .6091.
12
Valuation Ratios