Tesco’s international drive, particularly into Asia, seems to be paying off at last, with the grocer recording a profits rise of 12.5 % to £1.6 billion for the last six months, and the Asian side seeing profits up by 30% to 212 million. Sales in Asia are still relatively low at £5.3 billion but it looks as if Tesco has cracked the Far East and will soon achieve critical mass.
Elsewhere results were mixed, with Continental Europe profits rising 11 % to £212 million but the UK up just 5.5% to £1.2 billion on sales rise of 8.3 % to 32.9 billion.
Perhaps surprisingly chief executive Sir Terry Leahy was pretty bullish, claiming the UK recovery is in place and referring to a “strong global recovery which will underpin Britain’s steady growth.”
That global recovery does not include California where the group’s Fresh and Easy chain has just 168 outlets against Leahy’s initial plan for 10,000. And 13 of those stores are about to close. Leahy is predicting 400 stores and profitability for Fresh and Easy by 2013, yet the initiative has to be ranked a failure compared with the rest of its international moves.
It looks much more likely that Tesco’s UK bank will be its next success story rather than anything in the US. The banking profits rose 12% to £129 million and the group is due to launch mortgages and current accounts next year.
If Tesco can apply its famous value for money expertise and customer handling skills to banking it could eventually become a very strong player in this market and shake up the established leaders.