Tesco set to be world number two retail giant

Supermarket giant Tesco is on track to become the world’s second largest retailer within four years, according to research today.

The supermarket is expected to deliver annual sales of £106.7bn (€122.076bn) by 2012, overtaking French retailer Carrefour and ranking behind world leader Wal-Mart, said international grocery market expert IGD.

Its latest report predicts that international expansion in markets such as China and India will help Tesco to grow its turnover by two thirds between 2007 and 2012 despite the economic turmoil.

IGD is pencilling in compound annual growth of 11% for the retail chain.

However, IGD said retailers would face a “challenging” next few years as the world slips into recession and consumers clamp down on spending.

Emerging markets are not expected to be immune to the slowdown, but the pace of growth is still set to far outstrip that in the developed world.

IGD is forecasting annual growth of 13.2% between 2008 and 2012 for grocery markets in China and India.

Other emerging markets to watch are Indonesia, Ukraine and Vietnam, it said.

But Tesco recently reported that the downturn was forcing it to slow down the pace of growth in some areas.

Terry Leahy, chief executive of Tesco, said on unveiling third-quarter sales figures earlier this month that the group would put the brakes on its US expansion plans.

He added that it would “temper” growth in hard-hit countries, such as Hungary, Turkey and Ireland.

The group reported UK like-for-like sales growth of 2% in the 13 weeks to November 22 – its slowest growth since the last recession.

But its international business saw total sales rise by 14% at constant exchange rates.

Joanne Denney-Finch, IGD’s chief executive, said: “The next few years are likely to be challenging for the leading global retailers, yet all are well placed to achieve further growth, particularly internationally.

“Scale alone will not determine who will win in today’s global trading environment. Global retailers must also show increased simplicity, greater efficiency, flexibility and strong brand positioning to succeed.”