Tesco plc’s 2 Greatest Strengths

Two standout factors supporting an investment in Tesco plc (LON:TSCO).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


When I think of supermarket-chain Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US), two factors jump out at me as the firm’s greatest strengths and top the list of what makes the company attractive as an investment proposition.

1) Powerful brand

Just about everyone in Britain must have heard of Tesco and possess at least some understanding of what the company does for its business. Tesco is more or less everywhere in the country close to people. When we use a Tesco store, whether big, small or medium in size, we tend to do so knowing what to expect when we pass through the door. We know the colour scheme, the approximate arrangement of the store’s layout, the products that will be available to buy, and the process that we will need to complete to buy the products for sale. As likely as not, we will have returned to the store because on a previous visit we found the experience satisfactory. We are, therefore, exhibiting brand loyalty.

I’d argue that Tesco is more than just a brand in Britain, though; it is a super brand. The firm’s critical mass in Britain makes it hard for competitors to usurp Tesco. There’s already a Tesco store in every worthwhile consumer area. If a competitor starts up in a location, there’s a good chance that it will be competing geographically with Tesco right from the beginning.

Tesco generates about 60% of all its sales in Britain, so its brand here is a strong platform upon which to build further business lines and growth. For example, Tesco bank generates about 1% of sales and the firm is expanding abroad with about 16% of sales coming from Asia and 13% from Europe.

2) Consumable product lines

Tesco’s core business is the sale of food; we buy it, we eat it, we buy it again, and again, and again. Dealing in a product with such rock-solid repeat-purchase credentials can be a resilient strength. Regular repeat business can lead to reliable and steady cash flow, which the firm can use to reinvest into the firm’s operations for maintenance and growth, or to reward investors through the dividend.

Combining Tesco’s powerful brand with its consumable product range creates significant economic advantage.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Kevin does not own any Tesco shares. The Motley Fool owns shares in Tesco.

More on Investing Articles

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Up 35% from this year’s low! Here’s where I think Lloyds shares are headed in H2 of 2024

My Lloyds shares are already doing well this year but that’s not guaranteed to continue. What factors could turn the…

Read more »

Investing Articles

Approaching £5, is there still growth ahead for the Rolls-Royce share price?

The Rolls-Royce share price has been flying in the last year. But is there more growth ahead or should investors…

Read more »