1 A Service Strategic Preview: H1 February - September October 2012 DAVID GRAY Research Analyst

2 Analyst Comment: Strategic Preview: Tesco H1 “We are expecting a resilient performance in international during the half despite a difficult trading environment in China, alongside changes to legislation in South Korea affecting shop opening hours. We believe Asia will deliver robust growth despite significant headwinds with a standout performance at the Thai business which is rapidly rolling out smaller Express stores and will launch a grocery e-commerce operation later this year. In Europe, trading remains challenging and we expect to see a subdued performance in markets such as Hungary and Ireland, although the roll-out of grocery e-commerce across the region could provide a future boost to revenue. At the US business, we believe Tesco will come under further pressure from investors as it reports store openings remain slightly below expectations. In the UK, we will see signs of stabilisation driven by improvements to stores, customer service and more importantly own brand ranges. On recent store visits, we have seen improvements to layout, instore signage, counters and product quality. That said, the domestic market remains subdued and the full impact of store refurbishments will take years to be felt.” “We are expecting a resilient performance in international during the half despite a difficult trading environment in China, alongside changes to legislation in South Korea affecting shop opening hours. We believe Asia will deliver robust growth despite significant headwinds with a standout performance at the Thai business which is rapidly rolling out smaller Express stores and will launch a grocery e-commerce operation later this year. In Europe, trading remains challenging and we expect to see a subdued performance in markets such as Hungary and Ireland, although the roll-out of grocery e-commerce across the region could provide a future boost to revenue. At the US business, we believe Tesco will come under further pressure from investors as it reports store openings remain slightly below expectations. In the UK, we will see signs of stabilisation driven by improvements to stores, customer service and more importantly own brand ranges. On recent store visits, we have seen improvements to layout, instore signage, counters and product quality. That said, the domestic market remains subdued and the full impact of store refurbishments will take years to be felt.” DAVID GRAY Research Analyst

1.Expectations for the Half 2.UK: H1 Strategic Changes 3.Global: H1 Strategic Changes 4.Outlook 5.What’s new at Planet Retail Strategic Preview: Tesco H1

4 We believe H1 2012/13 has been a period of stabilisation for Tesco UK.

5  Expecting signs of stabilisation at home on the back of the store investment programme. New private labels such as Tesco Everyday Value have already been introduced. We believe Tesco will deliver a positive report on these at H1, but caution there is a risk improved value ranges could cannibalise sales from the standard line.  In international we foresee a modest impact from new legislation on shop opening days/hours in South Korea. Local governments are now able to enforce store closures on two days per month and restrict opening hours.  In China, Tesco is losing momentum with the planned closure of four unprofitable sites. As a result, we expect a more cautious approach to site selection in the second half.  In India, Tesco’s cash & carry plans are likely to remain on hold while it focuses on building the Star Bazaar hypermarket chain in partnership with Trent - retail arm of the Tata Group. However, we believe the announcement of recent changes to FDI rules in India will spark further investment from Tesco once it has dealt with problems at home.  Overall, we remain confident in Tesco’s ability to continue its UK turnaround but fear they may be losing momentum in some international markets. That said, we still expect Asia to become a more important region for the group in the future accounting for almost GBP23 billion (USD35.7 billion) in sales by Another solid half expected at group level but headwinds are beginning to come through in international.