Tesco’s much-anticipated entry into Wal-Mart’s backyard is imminent and will be through a joint venture with US chain Meijer, according to sources.
Tesco is tipped to take a 49% stake in the mid-west company for £2.5bn. It is thought it will announce the deal in a fortnight’s time.
Meijer would tick all Tesco’s boxes for expansion. Chief executive Sir Terry Leahy’s overseas expansion strategy calls for competent management, existing profitability, basic customer loyalty tools, growth potential and the ability to teach Tesco something it does not know.
Meijer, a Michigan-based family-owned grocery and general merchandise operation, runs 170 stores in Illinois, Indiana, Kentucky, Michigan and Ohio. The stores are particularly strong in non-food and comprise 40 departments including automotive, fashion and pharmacy as well as food. The company is regarded by industry commentators as well run, a good fit to Tesco
and is profitable, growing at 4% a year.
Sir Terry has also said the company would not look to acquire a US supermarket chain. A joint venture would allay shareholders’ fears about cost, particularly if it comes after a strong trading update.
A Tesco spokesman said the retailer did not comment on rumour and speculation. He also denied reports this week that a planned visit to India by Sir Terry was any indication that it was looking to open supermarkets in the strictly controlled country.
“Sir Terry is visiting our service centre and sourcing office in Bangalore, but that’s all,” said the spokesman. “There are lots of countries we’re looking at, and we can never say never. However, we’ve entered three new markets recently - China, Japan and Turkey - and we’re focused on growing these businesses.”
Meanwhile, analysts are expecting another market-beating performance when Tesco unveils its third-quarter results on Friday (November 25). “We’re expecting like-for-likes of between 4.5-5%, excluding petrol,” said Shore Capital analyst Darren Shirley.
Panmure Gordon analyst Justin Scarborough said he was looking at more optimistic growth of 7% in like-for-likes.
Siân Harrington