It took Tesco 75 years to make £1bn in pre-tax profits and just four to double that to £2bn. This demonstrates the power of a business model where economies of scale are invested in lower prices, which drive sales, thereby increasing buying power and enabling further price cuts. Such a virtuous cycle is hard to create, but equally hard to disrupt. Hence, Tesco produced like-for-like sales growth of 7.5 per cent (even excluding petrol) in a stagnant UK market last year. Marks and Spencer yesterday announced a woeful 5 per cent decline.

The risk of rapid growth in a mature industry is that it requires too much capital and ends up destroying returns. Last year, Tesco invested £2.7bn, including acquisitions, compared with depreciation of £800m - though much of that was in freehold land, which is not written off. But through profit growth, working capital improvements and property sale and leasebacks, Tesco has raised its return on capital employed from 10.2 to 11.5 per cent in two years.