FTSE in-depth: Tesco tipped for Polish expansion

By Geoff Foster for MailOnline
Updated: 05:41 EDT, 25 February 2011

There shouldn't be a dry eye in the house at Tesco's Cheshunt headquarters on Monday when staff not only celebrate chief executive Sir Terry Leahy's 55th birthday but his imminent retirement after 14 successful years in the job.

Birthday boy: Tesco supremo Terry Leahy

During that time he has turned Tesco into a supermarket juggernaut which broke through the £1bn profit mark in 2001 and now has sales of £60bn, leaving rivals including Marks & Spencer and J Sainsbury miles behind.

Leahy, who trousered around £5m on Wednesday by exercising options on shares at 408.34p a pop, will be a hard act to follow and his successor, international director Philip Clarke, has it all to do.

Leahy was instrumental in increasing the group's overseas expansion to places such as China, Thailand, Poland, Ireland and the US, but Clarke definitely has the experience and know-how to take Tesco to another level.

Tesco's shares shed 5.4p yesterday to 401.9p amid speculation that Clarke is ready to splash some cash in Poland.

The Polish Press reported that Tesco is on the verge of following up its recent acquisition of small Zabka convenience stores in the Czech Republic with the acquisition of Polish retail chain Zabka, which has been put up for sale by private equity firm Penta Investments.

Shore Capital analyst Clive Back said: 'We should "never say never", but we would be very surprised to see Tesco make such an acquisition at the €500m-plus price muted.'

Black added: 'Clarke has an excellent strategic platform to work with. As ever, there is scope for improvement, fine-tuning the UK and more fundamental decisions in the US. A stock not currently the flavour of the month should be a lot tastier down the line.'

As the price of Brent crude oil soared to a 29-month high of $119-plus a barrel, growing concerns that a rampant oil price will derail the global economic recovery dragged the Footsie down a further 63 points at one stage.

It later rallied as bears closed some hefty short positions and the close was only 3.55 points off at 5,919.98. The FTSE 250, on the other hand, remained in the dog-house at 11,409.74, down another 112.2 points.

Wall Street clawed back an initial 60 point deficit to trade 23 lower in the early stages on hearing that US jobless claims dropped by 22,000 to 391,000 last week. A batch of upbeat corporate results also helped sentiment.

Oil stocks reflected the continued strength of the black gold with Tullow closing 40p better at 1388.5p, Cairn Energy 9.8p dearer at 422.95p and BG Group 28.5p to the good at 1480.75p. Enquest, which was spun off from Petrofac, rose 8.9p to 143.7p.

Worries about rising fuel costs left International Consolidated Airlines Group 8.2p off at 226.05p. Formed by the merger of British Airways and Iberia, the group reports maiden quarterly results today. Investec expects passenger yields to have remained strong during the fourth-quarter but expects profits to be slightly blown off course by weather and air traffic control disruption.

Supported of late on revived bid hopes, car components group GKN reversed 4.7p to 197.55p. Citigroup downgraded to hold from buy ahead of forthcoming full-year results, sensing a pause in the pace of its recent rapid profit rise.

Industrial engineer Fenner shed 6.9p more to 307p, a level at which Credit Suisse believes its clients should take a look. The broker points out the stock over the last month has underperfomed the sector by 6% and is now trading 15% below its 12-month high. With 70% of group sales exposed, it is well placed to benefit from increasing levels of mining capital expenditure.

Sellers were again all over online retailer Ocado like a rash and the stock collapsed a further 16.5p to 205.25p. Only a couple of weeks ago the shares were changing hands at 290p. The John Lewis Pension Fund has since sold 57.3m shares, or 10.4%, at 265p a pop and late last Friday chief executive Tim Steiner trousered a cool £5m after selling a shed load. Meanwhile, Joe and Joan Public have been left holding the baby.

Troubled retailer JJB Sports crashed a further 6.5p or 24% to 21p on growing worries about its future. Capital Shopping Centres, Britain's biggest shopping centre owner, has said it will vote against a proposal by JJB to slash its rent bill, known as a Company Voluntary Arrangement (CVA). JJB needs creditors, including landlords, to back its second CVA in as many years.

Property investment group Workspace edged up 0.25p to 25p after announcing the formation of a new joint venture with the BlackRock UK Property Fund to invest up to £100m in high yielding multi-let industrial or office buildings in London and the South East with a £5m-£20m target lot size.