CityBeat: Tesco seizes c-store opportunity
Glynn Davis is impressed by Tesco’s ability to adapt
March 20 2003
Convenience stores chain T&S was scheduled to report its year-end results on March 24, but with its takeover by Tesco this clearly isn’t going to happen.
If it still had the chance then it would no doubt be ready to again highlight how it was in a rare growth spot within the food sector.
According to its former chief executive Jim McCarthy, T&S’ stock market rating never fully reflected this. For some time he had felt that the City couldn’t really decide whether it should be classified as a ‘General Retailer’ or a ‘Food Retailer’ and that this resulted in it being undervalued.
This was only addressed when Tesco spotted its potential and offered a significant premium to buy the business. In addition to acquiring a growth business Tesco has already pointed out that it will learn a great deal from the company which will be fed into its superstore chain.
Even if it proves to have paid a high price for the business – as it was accused of doing by rival Sainsbury’s – Tesco will undoubtedly gain a lot from injecting this new blood and thinking into its business.
This is exactly what the swashbuckling entrepreneurs such as Tom Hunter, Chris Gorman at the Gadget Shop and Philip – I’m sorry but I just can’t mention his name again in this column, but a clue to his identity is that his surname is a colour derived from mixing blue and yellow.
These skilled practitioners take-out a well-known retail operation, clean it up, throw in a bit of innovation and new thinking, and in doing so breathe new life into an old dog. The T&S deal shows that Tesco is far from being an old dog and that it clearly values the occasional influx of new thinking. Maybe this is a component of why it remains at the forefront of UK retailing.
Its shares may have come back to 177.5p – from a high of 269p – no doubt on the back of its involvement in the Safeway takeover battle and the possibility that it is interested in buying parts of the troubled Ahold business. But fundamentally its thinking – whether internal or acquired from outside the business – continues to be clear and innovative.
Glynn Davis was previously a fund manager in the City, and has since become a business journalist specialising in the retail sector. He regularly contributes to national newspapers and specialist trade publications. email Glynn@busicomm.fsnet.co.uk
