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Tesco Lotus has launched 45 Thai food products under the Tesco brand.

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Although Tesco delivered encouraging sales for Q3 in the UK, Asian results continue to be challenged.

LFL sales fell by 8% in Asia

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.

Profit recovery with new commercial approach

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.”

UK results are encouraging

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.

 

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Tesco has released its interim results for 2018/19, with sales in Asia reaching £2,365m, down 5.0% at constant exchange rates.

Thailand dragging on overall Asia performance

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. 

Repurposing stores remains a top priority

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.

Group sales show improvements in home market

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.

Improving quality and value in all markets

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. 

Expansion plan on track

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.

New store designed for modern shoppers

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:

  • Scan As You Shop technology introduced for a fun and convenient shopping experience
  • QR code payment available at all cashiers for cashless payments
  • First "green lane" which is an express checkout for customers who do not require plastic bags

"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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Tony Hoggett, CEO of Tesco Asia has been appointed to a new chief operations role, while Alison Horner, chief people officer will replace him to head up the retailer's Asian businesses, according to press reports.  The changes will take effect from June 1st.

"Leveraging operational strategy across the group"

In his new role Hoggett will work alongside chief product officer Jason Tarry and chief customer officer Alessandra Belini, focusing on "leveraging operational capability and strategy across the group". A key task will be to ensure the smooth running of stores following the recent drive to streamline store team structures and create broader people partner roles with regional remits.

Asia leadership change

While Hoggett will now mainly focus on the core UK business - led by Charles Wilson since the completion of Tesco's £3.7bn merger with Booker in March - he will retain responsibility for Tesco's joint ventures in China and India. The core Asian business in Thailand and Malaysia will now be headed by Tesco's chief people officer, Alison Horner. Commenting on her new role Dave Lewis said "she has a long history of operational experience and leadership within Tesco, and is ideally placed to lead the Asia team through the next stages of transformation”. Horner will be replaced by Natasha Adams, who is being promoted from UK people officer to take up the position on the retailer’s executive committee.

Hoggett returns to a COO role

CEO of Tesco Asia since March 2017, Tony Hoggett was formerly Tesco's UK COO. He joined Tesco in 1990 and gained extensive operational experience in both the retailer's domestic and international markets. Having started out managing stores in the UK, Hoggett then worked as a stores director, before moving to China in 2007 to head up the retailer's business in the south of the country, followed by a period as COO for its operation in Turkey. In 2011, he returned to the UK to continue operational roles, helping stabilise the performance of Tesco's domestic business.

 

IGD Tesco Business Update 2018 - Last chance to book!

23 May, London

Hear from Dave Lewis, Group CEO, Jason Tarry, Chief Product Officer, and Alessandra Bellini, Chief Customer Officer, along with their leadership team who will provide a business and commercial update.

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