Tesco 2012 Annual Report Download - page 10

To be as strong in everything we sell
as we are in food
It has been tough to achieve growth in sales of discretionary items –
not least in the UK, where we have seen a number of specialist general
merchandise retailers go into administration – and our UK like-for-like
growth in general merchandise, clothing and electricals has remained
negative. To adjust to this, we have been allocating more space to the
most popular products and improving merchandising. We are committing
less capital to new space for non-food and instead focusing more
resource on continuing to develop our online capability.
Baldock Extra Electricals department. We are seeing the early benefits
of our changes, but much remains to be done
Europe and Asia delivered stronger performances in general
merchandise, clothing and electricals, despite subdued consumer
confidence even in the better performing economies. I was pleased
with the performance of clothing in Central Europe, with sales growing
by 12% at constant exchange rates. This is testament to the strength
of the F&F brand and also to the performance of our new Extra
format stores. We ended the year with 44 of the new Extras in Europe
and three in Asia. These stores are introducing our customers to a
different way of shopping, with stronger ranging and new services, with
extremely encouraging results. Different categories of food and general
merchandise have their own distinctive look and feel within the Extra
store, known as ‘Worlds’, such as Baby World and Sports World. We are
making similar changes to the look and feel within our large UK stores,
partly as a result of the encouraging performances in Europe.
To grow retail services in all our markets
Tesco Bank is a key part of the potential we see in retail services.
Since we took full control of the Bank in 2008, our focus has been on
developing our own systems and infrastructure and recruiting and
developing a new team to run the operation. I’m delighted to say that
this period of migration from The Royal Bank of Scotland (‘RBS’) to our
own platforms is now nearing an end. Building a bank is a complex task
and I took the decision during the year to slow down the migration, so
as to minimise the customer impact. This final stage of migration will
be completed imminently, at which point the business can put more
emphasis on growth and on developing the potential we see in
financial services.
We have delivered good business growth in the year with revenue
up 14%, driven by a good performance in the insurance business.
The Bank’s profit figure includes several accounting adjustments,
so we measure business performance using baseline profitability,
which increased by a very encouraging 29%. The Bank’s capital
position has also remained strong through the year, supported by
a 7% growth in savings balances.
With the migration almost completed, the Bank is well positioned for
future growth. We are also on track to launch new products, starting
with mortgages, to broaden into a full-service retail bank.
Customers can purchase insurance and other Tesco Bank products in
store, alongside their weekly shop
Chief Executive’s review
6 Tesco PLC Annual Report and Financial Statements 2012