Profit soars for Tesco in Asia
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Tesco in Asia has reported a 54.1-per-cent boost in operating profit to £171 million as the company accelerated its cost-saving initiatives in Thailand.
Those reforms include distribution efficiency improvements and more focused, effective marketing activity.
Tesco in Asia sales during the 26 weeks to August 24 grew 8.4 per cent year on year to £2.556 billion, although on constant exchange rates that growth was pared back to just 1 per cent. Like-for-like store sales fell by 1.3 per cent largely due to reduced sales of general merchandise.
“We are focusing on differentiating our customer proposition in Thailand, across both large and small stores,” said CEO Dave Lewis in a review of the results. “We opened our first urban supermarket in June and our large store re-invention trial stores have been well received by customers, generating a sales uplift of 4.8 per cent.”
He said trials of Tesco in Asia’s Express proposition in Thailand also proved successful.
“We plan to roll out the enhanced offer to all Express stores. We have introduced 300 products in smaller pack sizes, added 100 products to our ‘ready to eat’ range and extended our ‘food to go’ drinks offer, in addition to maintaining our focus on fresh evening meal solutions.”
“Own brand expertise and price investment on key fresh food products” led to positive sales growth in Malaysia, he said.
Global group sales were flat at £28.3 billion during the first half, with operating profit up 25.4 per cent to £1.406 billion.
“We are focusing on differentiating our customer proposition in Thailand, across both large and small stores,”
Succession plan announced for CEO
Declaring Tesco group’s turnaround program complete, chairman John Allan revealed Lewis will step down as CEO in the northern hemisphere summer next year.
He will be replaced by Ken Murphy, who is currently chief commercial officer and president of global brands at Walgreens Boots Alliance.
“Today’s results confirm that the Tesco turnaround has been delivered,” said Allan. “Under Dave’s leadership Tesco has transformed customer satisfaction and rebuilt the business. We can now move forward with renewed confidence. We have an exceptional leadership team, a very clear strategy, a re-invigorated brand and financial strength.”
Lewis said his decision to step down was a personal one.
“I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton. Our turnaround is complete, we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering. The Tesco brand is stronger and customer satisfaction is the highest it has been for many years. Colleagues are doing an extraordinary job and their expertise shows in every store and channel every day.
“With these firm foundations and a competitive, sustainable growth strategy in place, I have no doubt that Tesco will kick on again under new leadership next year.
“When that time comes, I will watch progress from outside with interest, deep affection and pride. In the meantime, you can be sure that I will give the job everything I have until my very last day.”
Questions & Answers
Q.What specifically contributed to the significant increase in operating profit for Tesco in Asia?
What specifically contributed to the significant increase in operating profit for Tesco in Asia?
Operating profit rose due to accelerated cost-saving initiatives in Thailand. These reforms included distribution efficiency improvements and more focused, effective marketing activity across the region.
Q.Why did like-for-like store sales decrease despite overall sales growth for Tesco in Asia?
Why did like-for-like store sales decrease despite overall sales growth for Tesco in Asia?
Like-for-like store sales fell by 1.3 per cent, primarily because of reduced sales in general merchandise. This decline occurred even as overall sales grew, albeit less significantly at constant exchange rates.
Q.What initiatives did Tesco implement in Malaysia to achieve positive sales growth?
What initiatives did Tesco implement in Malaysia to achieve positive sales growth?
In Malaysia, positive sales growth resulted from focusing on 'own brand expertise' and strategic 'price investment' on key fresh food products. This approach aimed to enhance their offering in that market.
Q.What is Ken Murphy's current role before he takes over as CEO of Tesco?
What is Ken Murphy's current role before he takes over as CEO of Tesco?
Ken Murphy is currently the chief commercial officer and president of global brands at Walgreens Boots Alliance. He will succeed Dave Lewis as Tesco's CEO in the northern hemisphere summer next year.
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