While some may harbour doubts about the retail recovery, they don’t seem to be haunting Sir Terry Leahy.
While some may harbour doubts about the retail recovery, they don’t seem to be haunting Sir Terry Leahy. Tesco’s departing chief executive was in no doubt that while the pace might be slower in some places than others, all over the world the economy is on the way back from recession.
That should provide some reassurance at a time when the grocery market in the UK is offering limited growth. Tesco’s UK performance was unspectacular, but it is holding its own and crucially growing its profitability in what is a subdued home market, where the high cost of petrol -which is now easing - has clearly been a significant factor in holding back spending in supermarkets.
And it is times like these where Tesco’s model comes into its own. The sheer spread of its business means other faster-growing markets can provide the company levels of growth its home market can’t match. The pace of recovery in Asia in particular has helped Tesco demonstrate the benefits of its geographically diversified approach.
The downside is that other markets will inevitably lag behind, but the profits in those countries should generally follow. The news that the US business Fresh & Easy is expected to move into profit by its 2012/13 financial year will have heartened investors, even if a massive journey lies ahead for Leahy’s successor Phil Clarke in building scale stateside.
Not all retail businesses have the benefit of the scale and reach that Tesco has, and as our Big Story feature this week shows, consumer confidence indices give little encouragement about the UK consumer outlook. But the overall sales data remains relatively healthy - nothing spectacular, but a steady recovery despite all the uncertainty about the economy.
That’s what Leahy sees as well - indeed he thinks the recovery will accelerate over the months ahead, and that consumers are already increasingly treating themselves by buying into the Finest range more. His view certainly makes a refreshing change from those who feel that a double dip is almost a formality, and reinforces the need for retailers not to talk consumers into being anxious.
But it’s one thing being Sir Terry Leahy and another running a smaller non-food multiple, selling products people don’t have to buy every week and without the exposure to growth markets. It is the position of tremendous strength he has built for Tesco both here and worldwide that enables Leahy to have that confidence in the pace of the economic recovery.
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