Tesco 2006 Annual Report Download - page 12

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10 Tesco plc
Operating and financial review continued
• In Turkey,Kipa delivered a very strong performance. Sales
rose strongly and profit doubled. We now have eight
hypermarkets, including three trading very successfully
outside Izmir, with eight more planned for the current year.
The introduction into Kipa of a new suite of IT systems
called ‘Tesco in a Box’ to run many key functions in the
business, including supply chain and replenishment, went
live last year and this implementation has been the model
for subsequent roll-out to Japan and China.
Core UK Business UK sales grew by 10.7% in the year,
including a like-for-like increase of 7.5%. Growth in customer
numbers was the main driver of our sales. Customer spend per
visit (excluding Express) also rose in the year despite deflation
in our stores.
We have continued to invest in the things that matter for
customers:
• We have strengthened again our position as the UK’s best
value retailer by investing in lower prices for our customers,
with price deflation of 1.8% during the year (excluding petrol).
• On-shelf availability has also improved again and is now at
its highestever level. Our measure of this, which is based
on our in-store picking of tesco.com orders, shows that
availability improved by a full percentage point compared
with last year.
• New technology has helped our ‘one-in-front’ checkout
queue performance to improve so that many more
customers wait a shorter time to be served. A total of 1.5m
customers a week, in more than 200 stores, now regularly
choose to use our self-scan checkouts.
• At the same time, customers are recognising that they can
also shop more easily and comfortably in clearer aisles as
weintroduce more shelf-ready packaging to speed
replenishment of products.
• We’ve added 200 new Finest lines this year, over 100 new
Healthy Living products, including a Kids’ Healthy range,
nearly 100 Wholefoods natural snack and cupboard lines
as well as hundreds more standard own-brand and Value
items.
Record efficiency savings of £330m were delivered this year
by our Step-Change programme, which brings together many
initiatives tomakewhat we do better for customers, simpler
for staff and cheaper for Tesco. Most of these savings are
reinvested to improve our offer for customers. This year, we
have made particularly good progress with our efforts to control
energy costs. Other examples include:
• We have introduced mobile display units for pre-packed
bread into 400 stores, with a further 300 planned in the
first half of this year. Bread is now presented better for
customers, availability has improved and the replenishment
of stock is quicker and easier for staff.
• New ways of managing stock in stores to increase the
availability of products for customers, involving scanning
gaps using hand-held computers on a regular cycle, has
significantly reduced out-of-stocks and also reduced costs.
Wehave made further good progress with the development of
new space and store formats. A total of 2.0m sq ft of new sales
area was opened during the year in all formats, of which over
660,000 sq ft was in extensions to existing stores. With Extra
and Express being our least mature formats and with both
now delivering above-average investment returns, these
areimportant drivers of our growth. Going forward, we are
aiming to maintain our rate of growth in selling area, from
acombination of extensions, principally for non-food, and
new stores.
During the year, we opened another 18 Extra hypermarkets,
mostof them through extensions to existing stores, bringing
the total to118. Extranow represents 31% of our total sales
area. The trading performance of the large Extra stores we
opened in 2005 – in Bar Hill, near Cambridge; Talbot Green,
Mid-Glamorgan and Slough in Berkshire, all of which have
more than 100,000 sq ft of sales area, has been significantly
ahead of expectations.
More customers have access to our Express convenience stores
as we bring the Tesco offer and lower prices to neighbourhoods.
115 new Express stores opened during the year, bringing the
overall total to over 650. A further 130 new Expresses are
planned for 2006/07, as we focus on organic expansion.
On 6 April, we submitted a response to the Office of Fair
Trading on its proposal to refer the grocery sector to the
Competition Commission. If an inquiry goes ahead, we believe
the Commission will find that competition in our industry works
well and continues to deliver value, innovation and convenience
to consumers.
4
Our Value and
Finest ranges
enable customers
to shop within
their budgets.
3
In 2005, we sold five
million Value glasses.
An average of one in
four families bought
one last year.