Discounting clampdown boosts Tesco Asia profits
Actively reducing coupons and heavy bulk discounting programs has boosted Tesco Asia’s bottom line.
Tesco, headquartered in the UK, has reported a global profit of £1.644 billion, up a solid 28.4 per cent as it continues its turnaround strategy under the leadership of CEO David Lewis.
Tesco Asia sales fell in every quarter of the last financial year, by between 6 per cent and 14 per cent in the last three months, reaching 10 per cent for the year. But the division’s operating profit before exceptional items was £299 million, up 7.6 per cent at constant exchange rates and by 14.1 per cent at actual rates.
Tesco operates hypermarkets and convenience stores in Thailand under Tesco Lotus branding and hypermarkets in Malaysia.
The company says the improvement was a result of its strategy to withdraw from unprofitable bulk selling activities in Thailand and scale back mass couponing.
“Adjusting for this impact, underlying like-for-like sales in the region were down 1 per cent, largely reflecting the deflationary effect of lowering our fresh food prices for customers,” the company said.
“Furthermore, we have continued to reduce our cost base as part of the group’s overall cost savings program.”
Global group sales of £51 billion in the last quarter represented a 2.3 per cent year-on-year improvement, and marked the ninth consecutive quarter of like-for-like sales growth.
Group operating profit before exceptional items was up 28.4 per cent and Tesco has also reduced its net debt by a further £1.1 billion – to £2.6 billion.
Lewis described the results as “strong progress”.
“More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value,” he said.
“We have further improved profitability, with group operating margin reaching 3 per cent in the second half. We are generating significant levels of cash and net debt is down by almost £6 billion over the last three years. All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco.”