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Tesco has announced its full year results with LFL sales in Asia showing improvement in Q4.
Tesco Lotus has launched 45 Thai food products under the Tesco brand.
The food products include both savoury and sweet items with top quality ingredients from Thailand. These include sweet tamarind from Phetchabun, purple sweet potatoes from Ubon Ratchathani, durian from Chanthaburi, mangoes from Prachuap Khiri Khan and coconut sugar from Samut Songkhram. The ingredients are used in traditional recipes to deliver an authentic taste and at affordable prices.
Tesco Group collaborated with the Ministry of Commerce to develop a range of authentic Thai products that is internationally accepted in terms of safety and quality. The initiative will support Thai SME to expand their reach through Tesco’s distribution network both locally and overseas.
Sompong Rungnirattisai, Tesco Lotus CEO, said, “By working closely with Thai operators, we ensure that they achieve internationally accepted safety and quality standards required by the Tesco Group. We also share know-how in terms of packaging design, branding and marketing. Through this, we help to enhance SME capabilities and give them a competitive edge to succeed not only in Thailand but also in international markets, in line with the Ministry of Commerce’s Local to Global initiative."
Keep up-to-date with the latest retail developments from Asia.
Although Tesco delivered encouraging sales for Q3 in the UK, Asian results continue to be challenged.
Tesco reports stronger underlying performance in Asia, but sales in Thailand continue to be impacted by changes in pricing, promotions and couponing. Tesco management is restructuring its Thai business to stop bulk-selling. Government-issued welfare cards scheme also have an impact on sales, despite minor changes since it was first issued.
The retailer plans to accelerate its changes to its operating model in Thailand. It has been renegotiating its promotional offers, helping to reduce costs and delivering profit recovery.
Tesco CEO, Dave Lewis, commented, “In Asia, negotiations with suppliers are concluding satisfactorily and we can see this in our simpler, clearer, more impactful offer for customers.”
Strong seasonal proposition has delivered positive LFL Christmas results with 2% sales increase in the UK. It is outperforming the market in both volume and value terms, and in all the key categories including food, clothing and general merchandise.
Tesco has released its interim results for 2018/19, with sales in Asia reaching £2,365m, down 5.0% at constant exchange rates.
As predicted by the Tesco management, performance in Asia improved throughout the period as the business annualised its decision to stop bulk-selling. Asia LFL sales declined 9.0% in Q1 and although remaining negative, improved to -4.8% in Q2. However, it continues to see sales impacted by nearly 2% in Thailand, due to the goverments scheme of welfare cards that cannot be redeemed in modern retail chains. Profitability was down 29.1% to £100m due to the impact of sales, higher price investment and renegotiated promotional investment from suppliers into everyday low prices in Thailand, something that is expected to continue in H2.
Tesco continued to open and repurpose space in Asia in H1, opening 42,000 sq ft of net space. This included 314,000 sq ft of new space, with 39 net new stores, mainly related to new convenience store openings in Thailand. The business also closed 105,000 sq ft of space and repurposed 167,000 sq ft. Tesco repurposed nine stores in the half, the majority of which were again in Thailand, where it has formed new partnerships with third party businesses, such Mr.DIY, Echo Game & Karaoke and Cosmo Beauty.
Across the broader Tesco Group, the results were more positive with sales up 12.8% to £28.3bn, boosted by the retailers new partnership wth wholesale chain Booker in the UK.. Performance in its core, UK and ROI business, was impressive with total sales up 17.7% and LFL sales up 3.8%. While European sales declined 3.5% and 1.5% on a total and LFL basis respectively, impacted by store closures and Sunday opening hour restrictions in Poland.
Tesco CEO, Dave Lewis, commented, "We have made a good start to the year. We completed our merger with Booker in March and are delighted with performance so far. We announced a strategic alliance with Carrefour in July which goes live this month. We are firmly on track to deliver our medium-term ambitions and are continuing to improve the quality and value of our offer for customers in all of our markets."
Tesco Lotus has opened its 2,000th store in Thailand on Bangkruay-Sainoi Road.
The retailer committed to adding about 55,000 sq m of retail space in 2018. It has opened 45 stores so far: six hypermarkets, one department store, one talad store and 37 Tesco Express stores. Sompong Rungnirattisai, CEO of Tesco Lotus, is optimistic about the Thai economy and believes it will strengthen further. "We have seen an improving economy this year with the highest ever consumer confidence in July compared with the past few years. We expect the overall economy in the second of this year will be even better," said Sompong.
The Bangkruay-Sainoi store is the largest hypermarket opened in four years. The hypermarket takes up 5,000 sq m while the rest of the shopping mall takes up 17,000 sq m. Index Living Mall and Mr DIY are major anchor tenants.
Key features of the hypermarket:
"The Tesco Lotus Bangkruay-Sainoi store offers several services designed specifically with the 4.0 era customers in mind," Sompong said. There is free wifi throughout the mall. The shopping mall also has a 1.2km cycling lane, a multi-purpose park and a recycling centre to help shoppers recycle paper, plastic and electronic waste.
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