Tesco 2010 Annual Report Download - page 14

12 Tesco PLC Annual Report and Financial Statements 2010
International
continued
Investing in
the drivers of
future growth
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Throughout the year we opened
63 new stores in South Korea, bringing
our total number of stores to 305
South Korea
Homeplus in South Korea delivered
another very good performance this
year with total sales growth of 33%
(including 3% on a like-for-like basis)
and profits up more than 50%. The
integration of the former Homever
stores has been completed successfully,
ahead of plan, with the stores now
trading profitably with double-digit
like-for-like sales growth in the fourth
quarter. South Korea also opened 63
new stores in the year. The acquisition
in 2008 has helped Homeplus grow
its market share and close the gap
with the market leader. We opened
our first franchise store in February
2010 with more scheduled to open
in this financial year. South Korea is
our largest international business
with sales of £4.5bn and profits of
almost £300m.
Thailand
Tesco Lotus in Thailand has delivered
a good performance – despite a
background of continued political
uncertainty – with double-digit
profit growth on a constant exchange
rate basis. A strong store opening
programme has helped drive our sales
growth this year in a market in which
we remain the clear market leader.
Strong productivity gains have enabled
us to make significant investments in
lowering prices for customers whilst
still delivering good margins and
positive cash flow. The launch of
Clubcard in August 2009 marked a
new stage in the development of our
business and take-up from customers
has been excellent, with four million
customers signed up so far.
China
In China, we are laying the
foundations for long-term growth,
with further investments in new
stores, supply chain infrastructure
and management. We have focused
on three regions – each with its own
management team – and with a focus
on expansion into second and third
tier cities. We opened 17 hypermarkets
in the year, including in our first
three Lifespace shopping centre
developments in Fushun, Qingdao
and Qinhuangdao, with average tenant
occupancy over 80% at opening.
We plan to open 23 hypermarkets in
2010/11 of which nine will be in new
Lifespace malls. The mall development
programme will be funded in part
through joint ventures with third-party
investors. The first such joint venture
– incorporating three malls – was
established in November 2009 with a
syndicate of leading Asian investors.
Malaysia
Our business in Malaysia made good
progress with sales growing 9% this
year – increasing our market share.
We continue to invest in Clubcard with
more than one million customers
signed up and with a dunnhumby
team working with us locally to
provide insight on pricing, range and
promotions. We grew our space by
11% this year but with the economy
starting to show signs of recovery
we plan to step this up to 27% growth
in 2010/11.
Japan
In our 2008/9 Annual Report, we
stated that with the challenging
market conditions in Japan, we
had only limited headroom on the
carrying value of our Japan assets.
Given the further deterioration in the
retail market, it became appropriate
to make impairments against the
goodwill arising on the acquisition
we made to enter the market in 2003,
resulting in a £131m charge to the
income statement (£82m in the first
half and £49m in the second half).
Our team in Japan continues to
make good progress in developing
the business. Our new convenience
format is receiving good feedback
from customers who like the focus on
fresh food and new features helping
us to differentiate our offer, such as
the in-store bakery, an extensive wine
range and our first 400 own-label
products – which after only a few
months already account for 10%
of sales.
India
Our early plans in India are progressing
well. Our local management team is
helping our franchise partner, Trent,
to develop its Star Bazaar hypermarket
operation which is currently achieving
like-for-like sales of c.40% and buys
more than 70% of its products from
Tesco’s wholesale business. Plans for
our cash and carry business are also
on track with our first store expected
to open towards the end of this year.
There are more
Clubcard holders
internationally
than in the UK