Tesco 2010 Annual Report Download - page 16

14 Tesco PLC Annual Report and Financial Statements 2010
International
continued
Our flagship My Narodni
department store in Prague
reopened in September 2009
after a major refit
Europe
Europe overall delivered a robust
performance against strong economic
headwinds in the form of a sharp
downturn in economic activity
causing a slow-down in customer
expenditure. Sales growth varied
across the region with a good
contribution from new space helping
sales grow in Poland and Turkey and
stay stable in the Czech Republic and
Hungary. Significant price deflation
and cross-border shopping driven by
rapid movements in exchange rates
resulted in sales declining in Slovakia
and Ireland. Overall, however, the
sales trends are now improving; each
of our European businesses showed
an improvement in like-for-like sales
growth in the fourth quarter.
We have made market share gains
across our Central European markets
by reducing costs and lowering prices
for customers and by continuing to
invest in new space. Profitability in the
region as a whole declined slightly
compared with last year but was
resilient given the severity of recession.
We are continuing to invest in the
region, opening 1.8m sq ft of new
space during the year – less than
originally expected, primarily as a
result of the economic environment.
With the outlook improving we will
be stepping up the rate of opening
with a plan to add 3.1m sq ft of new
space across the region in 2010/11.
Republic of Ireland
In Ireland we have made substantial
changes to our business, which was
facing the dual challenge of a severe
recession and cross-border trading. By
integrating more of our international
brand buying with our UK business we
have been able to reduce the prices
of 12,500 products by an average
of around 20%.
Customers are responding
enthusiastically to our improved
pricing and range; significant uplifts
in volumes have now offset the impact
of lower prices, resulting in positive
like-for-like sales growth in the last
few weeks of the year and a growing
market share. These changes,
combined with a substantial cost
reduction programme, have enabled
Tesco Ireland to deliver a steady
financial performance despite the
economic headwinds and significant
self-imposed price deflation. The
cost of the exceptional restructuring
activities was £33m in total for
the year.
Hungary
Our business in Hungary continues
to perform well – with sales levels
being maintained despite a very weak
economy in which unemployment
levels increased by more than 25%
and consumers were hit with a 5%
increase in sales tax. We are continuing
to execute our strategy of investing
in the shopping trip for customers,
helping our overall market share to
grow again in the last year, further
consolidating our market leadership.
Poland
In Poland, we have had another good
year with strong growth in sales and
profits on a constant exchange rate
basis. A good performance from the
converted Leader Price stores, the
popularity of our Discount Brands –
now in one in three baskets – and
our clothing range, which achieved
like-for-like sales growth of more than
20%, have helped our business
maintain positive ex-petrol like-for-
like sales growth overall. The launch
of Clubcard in August 2009 has been
very well received, with 1.8 million
customers signing up so far.
Czech Republic
In the Czech Republic our strong
new store opening programme has
helped us maintain sales at levels
similar to last year and improve our
share of a market affected by high
unemployment and price deflation.
Our Express and 10,000 sq ft format
stores continue to do well with
positive like-for-like sales growth,
but as in most markets, growth in
the larger stores remains subdued as
customers curtail their spending on
non-food in the current environment.
The outstanding category in non-
food has been clothing with double-
digit sales growth. Our flagship My
Narodni department store in Prague
was reopened after a major refit
project and we are pleased with the
results to date.
The first Tesco
outside the UK
opened just 15 years
ago – in Hungary