Tesco speeds up Express rollout with T&S buy

Just a day after the Co-op strengthened its position in the UK convenience store sector with the acquisition​ of the struggling Alldays group, the UK's leading supermarket group Tesco has also made a move into that sector with the purchase of the T&S group.

Tesco is already present in the convenience store market with its Tesco Express format, and will now add a further 862 outlets to its 100-strong portfolio. T&S operates under the One Stop and Day & Nite fascias, but also owns the Dillons newsagent chain and Supercigs, a chain of tobacco discount shops, mostly in the West Midlands.

Tesco offered £377.3 million (€597.3m) for T&S in an all-share deal, and has also agreed to assume T&S' debt of £153 million. The company said it expected the deal to be earnings enhancing in the first full year.

Sir Terry Leahy, chief executive of Tesco, said: "This acquisition is great news for customers and staff. It will create value for shareholders and at the same time allow Tesco to grow in the convenience market. The conversion of many of T&S' stores to the Tesco Express format will create jobs overall and will strengthen our presence in many neighbourhoods across the country."​

Sir Terry added that the acquisition would allow Tesco to combine its know-how and retailing capability with T&S' expertise in the convenience store sector, bringing "significant improvements for customers and financial benefits across T&S' portfolio of convenience stores"​.

T&S reported sales and operating profits of £933 million and £46 million respectively in 2001. Dillons and Supercigs accounted for 24 per cent of sales and 12 per cent of operating profit in 2001, but these are surplus to Tesco's requirements and will be sold on, as could a number of other stores.

With restrictions on new store developments in many parts of the UK, and the growing fear that food shoppers are being forced further and further outside town centres, Tesco and other UK supermarket groups have been looking to increase their share of the convenience store market by opening outlets in high street locations.

This has been the motivation behind the Tesco Express format, and the T&S acquisition will allow the UK number one to step up the pace of the rollout of this format by converting a number of the One Stop and Day & Nite stores to this fascia, thereby gaining a strong market share in a region where the chain is not well represented in this format. Tesco said it expected that 450 of T&S' 862 convenience stores would be converted over the next three to four years to the Tesco Express format.

This, it said, would bring customers lower prices (since Tesco's buying power is far higher than that of the smaller group), improved service and store environment, and better product availability, quality and choice.

The remaining T&S neighbourhood convenience stores will continue to trade independently as One Stop or Day & Nite, benefiting from improved ranges and a better store environment.

Tesco estimated that its share of the UK convenience retailing segment will be around 5 per cent on a national basis following the deal, and that the conversion of the stores to the Express format would create around 1,400 new jobs.