Tesco 2011 Annual Report Download - page 50

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Finding the right location
Our Site Research departments in each country direct the property
acquisition strategy by identifying optimal locations for new store
developments and extensions. This work is underpinned by advanced
spatial analysis and a data-led approach that considers our customers,
competitors, local market shares and existing store performance.
The Site Research teams provide sales forecasts for new stores
using highly accurate, in-house models built using our existing store
performance, Clubcard data, demographic data, government statistics
and road networks. On average we forecast the sales of new UK stores
to within 3% accuracy.
Property – developing and
building stores for customers
Tesco’s property activities have one principal
objective: to ensure our customers can benefit
from the best located and designed stores.
As a result of this property development and
management, we also create sustainable,
long-term, embedded value for shareholders.
Acquiring high-quality property is an important component of being
a successful retailer. Through our experience over decades in the UK –
and more recently in international markets – we have market-leading
property skills that help us stay ahead of our competitors.
We have built up a substantial set of assets, which in total have a market
value of £36 billion. By owning our property we get the benefits of
appreciation in property prices – in particular in the emerging markets
in which we operate.
The process for creating value in property starts with finding the right
location. After acquiring a site and gaining planning consent we design
and build a world-class store. We then trade from that store and
increase its value as we grow our sales. And then once an asset is
mature we look to crystallise the value created by selling it and leasing
it back at a reasonable rent. This frees up capital which can be invested
in new developments.
Flexible, multi-format approach
Having multiple formats – from large shopping malls to Express
convenience stores – allows us to fulfil the full range of shopping
missions for customers and it also gives us flexibility to adapt to
different local markets and planning regimes. In some cases we also
develop mixed-use projects, combining new retail space with residential
development on the same site. This enables us to build a store on
a desirable site when otherwise it would not be economically viable.
46
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TESCO PLC Annual Report and Financial Statements 2011
BUSINESS REVIEW
Property