Tesco 2010 Annual Report Download - page 17

With growing sales and improvements
in productivity, waste and distribution
costs, store economics are improving
steadily. Overall trading losses were in
line with guidance provided last year
and reflect the fact that Fresh & Easy
has been built with the infrastructure
to support hundreds of stores.
We expect to open new stores at a
rate of around one per week this year
with a focus on areas where the local
economy has been less severely hit
and where we are seeing substantially
stronger sales performance. One of
the benefits of the downturn is a
slightly softer property market; we
are now able to buy more freehold
properties and the overall cost of
building a store has fallen by
approximately 20%. A combination
of new space and organic sales
growth means that sales growth this
year will be more than 50%.
Although we do not expect losses to
be much lower in 2010/11 we believe
they have now peaked.
Tesco PLC Annual Report and Financial Statements 2010 15
Our business
145 Fresh & Easy
stores by end of
2009/10
Asia
1,230
Europe
954
US
145
International stores
Slovakia
In Slovakia, the overall retail market
has been very challenging with rising
unemployment and sharp falls in
industrial output. Cross-border
shopping remained significant for
much of the first half but abated in
the second half after we reduced
our prices within Slovakia to bring
them more closely into line with
neighbouring countries. Like-for-like
sales growth is recovering strongly;
from negative double digit for the
first half to positive growth in the final
few weeks of the year.
A good store opening programme
combined with investments in the
shopping trip and customer loyalty –
with Clubcard launching in Slovakia
in September 2009 – have helped us
extend our market-leading position
further during the year. We have
recently refitted and rebranded one of
our large hypermarkets in Bratislava
as an ‘Extra’ adding new departments
such as pharmacy, photo processing,
opticians and phone shop. This is the
first of its type in Central Europe.
Turkey
In Turkey, whilst we slowed our rate
of new store growth, it remained
strong enough to offset the like-for-
like sales decline, helping us to grow
overall sales during the year. With
the economy showing early signs of
recovery we are planning to resume
a faster rate of expansion this year.
Turkey remains an important
strategic long-term opportunity for
us as a large, growing and relatively
underdeveloped retail market.
United States
In the United States, Fresh & Easy has
been making good progress, despite
prolonged weakness in the California,
Nevada and Arizona economies.
Customers are enthusiastic about
our range, particularly the fresh food
prepared in the Fresh & Easy kitchen,
the store environment and the
friendly service. As with any of our
new businesses, we are adapting and
improving our offer in response to
customer feedback. During the year
we’ve broadened the range in some
key categories – like cereals and pet
food – and added larger pack sizes
for families. We have also introduced
a range of lower-priced house brands
to help families on a budget.
With the improvements to our range
implemented and with the number
of stores growing (145 stores by end
of 2009/10), we launched media
campaigns – in September 2009 and
January 2010 – focusing on how
Fresh & Easy can offer both high
quality
and low prices. A combination
of increased customer awareness and
the improvements we have made in-
store helped to drive stronger positive
like-for-like sales growth in the second
half of the year.