Tesco 2010 Annual Report Download - page 13

Tesco PLC Annual Report and Financial Statements 2010 11
Our business
Lifespace – our unique
approach in China
destination providing shopping
(including a 100,000 sq ft Tesco
hypermarket), entertainment, dining
and leisure.
We are partnering with investors to
share the capital commitment on some
of these projects, enabling us to roll out
more sites faster.
International
Delivering
great value for
customers
on the quality and resilience of our
assets and local management teams
and strengthens our confidence in our
international strategy and long-term
growth prospects.
Asia
We have delivered a strong
performance in Asia despite
challenging economic conditions in
the region. We have grown sales and
profits well – driven by new space
and the excellent performance of the
stores acquired in South Korea in
2008, which are now profitable. As
economies generally in Asia start to
recover we are seeing improving sales
trends in all our businesses except
Japan, where economic conditions
remain subdued, with overall like-for-
like sales for Asia turning positive in
the fourth quarter. Profits in Asia grew
by 24% with margins strengthening
significantly in the second half (6.1%
compared to 4.3% in the first half).
In International we have delivered
a resilient performance in the
face of challenging economic
headwinds. Our businesses have
made good progress – delivering
for customers today and at the
same time investing in the drivers
of future growth. Our strategy is
working – and we ended this year
stronger than we started it.
Each of our businesses has adapted
itself to the demands of its local market
– with strong local management
teams finding ways to lower costs
and deliver great value for customers.
Increasingly our international
businesses are also utilising the scale
and skill of the Tesco Group – with
more international sourcing, Discount
Brands now in seven markets, F&F
clothing now in ten countries, Clubcard
introduced in seven countries with
more Clubcard holders internationally
than in the UK – and the Tesco
Operating Model sharing our global
best practice to the benefit of all
our businesses.
After a very tough first half of the year
we are now seeing encouraging sales
trends across almost all our markets;
we saw strong improvements in like-
for-like sales in the fourth quarter
compared to the third.
With clear signs that our international
markets are starting to recover we are
planning to resume a faster pace of
new space opening in the coming
year. In 2009/10 we opened 5.1m sq ft
of new space and in 2010/11 we will
open 8.5m sq ft in addition to nine
shopping malls in China. The
performance of our International
businesses through this severe
recession has provided reassurance
Our Asian markets offer a significant
long-term opportunity. We have
continued to invest through the
downturn to ensure that we will be
in an even stronger position as the
economies recover. This year we
opened 3.0m sq ft of new space
across the region – an increase of
more than 10% – and we plan to
open 4.9m sq ft next year (excluding
shopping malls). We have also
continued to make good progress
towards developing a strong brand in
our most developed Asian markets
with further expansion of Clubcard
and our Retailing Services businesses.
The size and scale of China provides
unique challenges for a retailer but also
offers a huge opportunity for a business
prepared to show flexibility and vision.
Our strategy is to expand into less
developed second and third tier cities
by opening hypermarkets in leading
shopping malls. We’ve found it hard to
find locations with the right facilities in
some cities – giving us an opportunity
to develop our own malls, to ensure they
are the right size, location and design
to meet the needs of the new
Chinese consumer.
During the year we opened our first
three Tesco Lifespace shopping malls
in Fushun (pictured), Qingdao and
Qinhuangdao and we will open nine
more this year. Each mall comprises
approximately 500,000 sq ft of retail
space over five floors and is a one-stop