1 A Service Strategic Preview: Q3 September - November December 2012 DAVID GRAY Research Analyst

2 Analyst Comment: Strategic Preview: Tesco Q3 “We expect Tesco’s domestic business to put in a satisfactory performance in Q3. The rapid adoption of self-help measures such as the relaunch of ranges including frozen food and wine will help drive food sales. That said, we expect non-food to continue to drag UK sales down, with the possibility of a flat or negative total like-for-like at home. We also continue to note the size of the task facing Tesco UK. Even with the plan to refurbish 430 stores in fiscal 2012 on track, this will only scratch the surface of the more than 3,000 shops it operates in the UK. In international, we expect headwinds to come through in all regions including Europe, Asia and the United States. In Asia, Tesco is continuing to feel the effects of changes to legislation in Korea alongside slowing momentum in China. In Europe, the chill from the Eurozone crisis has now spread to Central European markets, affecting Tesco’s businesses in the region. Meanwhile, the US arm is flagging and we anticipate Tesco will continue to restrict capital investment in the venture remaining unconvinced it can deliver long-term returns for shareholders. That said, opportunities for the growth of Tesco’s businesses globally are substantial, particularly in Asia where despite headwinds we anticipate sales will reach more than GBP20 billion (USD32 billion) by 2017, driven by Thailand and China. Also, there remains long-term opportunities for new market entries in the region such as Vietnam.” “We expect Tesco’s domestic business to put in a satisfactory performance in Q3. The rapid adoption of self-help measures such as the relaunch of ranges including frozen food and wine will help drive food sales. That said, we expect non-food to continue to drag UK sales down, with the possibility of a flat or negative total like-for-like at home. We also continue to note the size of the task facing Tesco UK. Even with the plan to refurbish 430 stores in fiscal 2012 on track, this will only scratch the surface of the more than 3,000 shops it operates in the UK. In international, we expect headwinds to come through in all regions including Europe, Asia and the United States. In Asia, Tesco is continuing to feel the effects of changes to legislation in Korea alongside slowing momentum in China. In Europe, the chill from the Eurozone crisis has now spread to Central European markets, affecting Tesco’s businesses in the region. Meanwhile, the US arm is flagging and we anticipate Tesco will continue to restrict capital investment in the venture remaining unconvinced it can deliver long-term returns for shareholders. That said, opportunities for the growth of Tesco’s businesses globally are substantial, particularly in Asia where despite headwinds we anticipate sales will reach more than GBP20 billion (USD32 billion) by 2017, driven by Thailand and China. Also, there remains long-term opportunities for new market entries in the region such as Vietnam.” DAVID GRAY Research Analyst

1.Expectations for the Quarter 2.UK: Q3 Strategic Changes 3.Global: Q3 Strategic Changes 4.Outlook 5.What’s new at Planet Retail Strategic Preview: Tesco Q3

4 Satisfactory performance is expected at home, although there is a risk comparable store sales could fall back into negative territory.

5  We expect subdued sales in non-food to dampen the performance of the UK business. That said, we continue to be impressed by the pace of change at Tesco UK. Private label development, particularly in food, has continued at pace with the launch of new ranges such as Quirky Bird in the wine category. Refurbishments are on track and we have observed improvements on visits to non-flagship stores.  In international, sales will be hit by a slowdown, particularly in Asia where changes to legislation will continue to have a negative impact on Tesco’s largest international business South Korea. Meanwhile, the negative effects from the Eurozone crisis will be felt at Tesco’s Central European and Irish operations.  That said, we anticipate a standout performance from Tesco’s Thai business and note its presence in key emerging markets such as China and Turkey give it long-term growth potential.  In terms of the US fledgling, we are less optimistic, noting Tesco’s recent decision to reduce store openings to a mere trickle indicate management may be losing patience with the venture. We anticipate a continuation in the slowed store opening programme as Tesco stays in cash conservation mode. A decent quarter is expected, although headwinds in key markets across Europe, Asia and the US will continue to dampen sales.