Welcome to the Tesco AGM 2016 John Allan Chairman Dave Lewis - PowerPoint PPT Presentation

Welcome to the Tesco AGM 2016

John Allan Chairman

Dave Lewis Group Chief Executive

Agenda • Significant progress • Our three priorities • Q1 update Looking ahead •

Broad-based improvement Improving like-for-like sales 4.1% 4.0% 3.5% 1.0% 0.9% 2.4% 3.3% 1Q 2Q 3Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 4Q 2.2% 1Q 0.1% 4Q (1.2)% 1Q 2Q 3Q 4Q (2.9)% (1.0)% (1.3)% (1.5)% (4.4)% (3.4)% 1Q 2Q 3Q 4Q Asia ROI Europe UK

Broad-based improvement Group operating Group LFL profit 1 1.6% £590m 1Q 2Q 3Q £2.6bn £354m 4Q (0.3)% £161m (0.5)% (1.2)% 2H 14/15 1H 15/16 2H 15/16 Sales momentum Improving Retail operating profitability cash generation 1. Group operating profit before exceptional items.

Broad-based improvement 68% 60% 75% 85 51% 80 76 71 71 40% 2014 2016 Oct-14 Feb-16 FY 14/15 1H 15/16 2H 15/16 Supplier Colleague Customer engagement 2 viewpoint 3 satisfaction 1 1. Reflects % customers rating overall service and colleague helpfulness as excellent as part of the weekly Customer Viewpoint survey. 2. Reflects % of colleagues recommending Tesco as a great place to work as part of What Matters To You Survey undertaken every January and August. 3. Reflects % of UK suppliers responding positively when asked “overall how satisfied are you with your experience of working wi th Tesco” as part of the Supplier Viewpoint survey.

Three priorities 1 Regaining competitiveness in core UK business 2 Protecting and strengthening the balance sheet 3 Rebuilding trust and transparency

Improved customer offer 80% 80% 75% 65% 35% 40% 55% 55% Oct-14 Oct-14 Feb-16 Oct-14 Feb-16 Feb-16 Oct-14 Feb-16 Service 1 Availability 2 Price 3 Range 4 1. Reflects % of customers rating overall service and colleague helpfulness as excellent as part of the weekly Customer Viewpoint survey. 2. Reflects % of customers who were strongly satisfied with overall availability as part of the weekly Customer Viewpoint survey. 3. Reflects % of customers very satisfied with prices paid as part of the weekly Customer Viewpoint survey. 4. Reflects % of customers rating overall range of food as part of the weekly Customer Viewpoint survey.

Better service 70% 85 114 104 80 76 52% 71 71 1 PI 2014 2016 Oct '14 Feb '16 More hours Colleague Customer engagement 2 feedback 3 1. Productivity Index. 2. Reflects % of colleagues recommending Tesco as a great place to work as part of What Matters To You Survey undertaken every January and August. 3. Reflects % customers rating overall service and colleague helpfulness as excellent as part of the weekly Customer Viewpoint survey.

Record availability Stock down 96% 82% 94% 10% Sales-based Clearer backrooms Optimum shelf capacity availability

Lower, more stable prices £46.98 7% 2Q 3Q 4Q 1Q £45.48 down 37% (15)% (26)% £44.73 (32)% Multibuy Price investment 1 Fewer coupons promotions 2 1. Price data shows the price paid for a typical basket of products as at August 2014, August 2015 and February 2016. 2. Reflects the year-on-year movement in products on multibuy promotion.

Brand Guarantee

Right range for customers + 2,011 new lines 18% 33  New Seeded Folded Flatbreads All food categories Average range Innovation reviewed reduction

UK volume-based recovery UK like-for-like volume 4.0% 3.3% (7.0)% 1 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 1. 3Q 15/16 adjusted for the impact of non-repeated coupons in the prior year.

Protecting and strengthening the balance sheet £3bn £2bn £1bn 13/14 14/15 15/16 Pension transition Sale of Homeplus Capital discipline complete

Protecting and strengthening the balance sheet Acquired Acquired Agreed sale freehold: freehold: of 14 sites 36 superstores 21 superstores for £250m 13 Extras March 2015 February 2016 October 2015

Rebuilding trust and transparency Supplier viewpoint 1 68% 60% 51% 5 24 5 <£100k = 14 days FY 14/15 1H 15/16 2H 15/16 Accept GCA New commercial Payment terms Encouraging findings approach and on-time progress payment 1. Reflects % of UK suppliers responding positively when asked “overall how satisfied are you with your experience of working wi th Tesco” in Supplier Viewpoint survey

Rebuilding trust and transparency No surplus food waste by 2017 Charity Community Food Local community grant scheme partnership Connection

Rebuilding trust and transparency BrandIndex Index Score – an overall measure of brand health 18.0 0.0 Jan 2014 Feb 2016 Source: YouGov Brand Index

Three priorities 1 Regaining competitiveness in core UK business UK transactions up 2.8% in 4Q 2 Protecting and strengthening the balance sheet Total indebtedness £6.2bn lower 3 Rebuilding trust and transparency Customer, colleague, supplier measures all improved

Q1: Positive like-for-like sales growth maintained + 0.3% + 2.8% + 3.3% Europe Asia UK & ROI

Q1: Continued volume growth + 2.2% + 5% +2.7% UK Fresh meat and produce International outperformance

Underpinned by improving customer offer 75% - 6% 60% 15/16 16/17 May-16 May-15 Lower prices Simpler model Better service

Greater focus on our core business

“Britain’s Favourite Supermarket”

What’s next? • The customer remains our number one priority • Remove reasons to shop elsewhere • Do more of what makes Tesco unique • Continue to simplify our service model • Rebuild longer- term profitability….sustainably • Challenging, deflationary and uncertain market

Removing reasons to shop elsewhere Unique Value Tesco Equation offering

“Little Helps” for customers

Serving Britain’s shoppers a little better every day