Tesco: How the grocer is performing in its overseas markets

Tesco today said a number of “external pressures” had led to a reduction in full-year trading profit internationally. Full year like-for-likes in Asia fell 1.7% while its European arm’s like-for-like sales fell 2.3%.

Asia

China – Full-year like-for-likes down 1.1%. Tesco last year took the decision to take “more cautious stance” in arguably retail’s most promising market moderating its new store openings as customer demand slowed. While the retailer closed five underperforming stores in the year in focusing on its strongest regions, Tesco maintained China “remains a strategically important market”.

Malaysia – Full-year like-for-likes 0.5% up. Tesco has pledged to a greater proportion of its capital investment to Malaysia, as well as South Korea and Thailand, “where we have strong positions and significant potential for further growth”. “In line with our efforts to move to a more sustainable balance of growth and returns, we have adopted a new approach to capital allocation between our international markets,” the retailer said.

South Korea – Full year like-for-likes down 5.3%. Korean sales were held back by the impact of regulatory restrictions on opening hours which have damaged sales in the key trading market which is its largest outside the UK.  “These restrictions led to a decline in trading profit for the region as a whole,” Tesco said.

Thailand – Full year like-for-likes up 3.1%. Tesco Lotus continues to be the star performer in the grocer’s international arm. The grocer enjoyed improved like-for-likes in the second half, up to 4.4% from 1.7% in the first half. The retailer this month launched grocery home shopping in the country and will hope online sales can add to strong store growth.

Europe

Czech Republic – Full year like-for-likes down 7%. The plummet in like-for-like sales makes for grim reading in a market Tesco has long enjoyed good growth. The European economic crisis has hit the nation hard and it has experienced four consecutive quarters of declining GDP. Food inflation is at a four-year high and consumer confidence has stayed at very low levels. “The market has also seen increased competitive tension, with our desire to maintain a compelling offer for our customers impacting margins,” Tesco said.

Hungary – Full year like-for-likes down 0.7%. Inflationary pressure has been felt less in Hungary and like-for-like performance was better than elsewhere in Europe. However, Tesco has faced an additional crisis tax on sales for the last three years, which has held back its total profitability. This tax will be shelved in the coming year and Tesco expects profits to improve by £30m next year.

Poland – Full year like-for-likes down 3%. A sharp decline in the rate of growth in consumer spending, which got worse as the year progressed, impacted performance in the country. “Consumer confidence remains near historic low levels,” Tesco warned.

Slovakia – Full year like-for-likes up 0.6%. As in Hungary, less pressure from inflation has helped shoppers in Slovakia. However, the like-for-like trend showed a 3% first half rise dropped to a 1.5% fall. Tesco has also launched its online grocery service in the country.

Turkey – Full year like-for-likes down 5.4%. Tesco said it has faced “particularly intense competition, in a year in which we have retrenched from our strategy of pursuing large store expansion to the east of the country”.  It said it had experienced intense cost-price inflation.

Republic of Ireland – Full year like-for-likes down 0.3%. Pressure on consumers’ wallets has impacted on sales in Ireland. The retailer said: “After a period of relative calm following its early exposure to the crisis, customers are facing a further round of austerity measures which has further impacted spending.”