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Tesco Foreign Markets Bottom Out, No Recovery

Source: Reuters
11/05/2009

Barcelona, May 8 - The downturn in Tesco's foreign markets has bottomed out, but they are not yet showing signs of reviving, the head of the British retailer's international business told Reuters on Friday.

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"I think now it's bottomed, but it's not showing any signs of recovery yet," Philip Clarke said in an interview on the sidelines of the World Retail Congress, referring mainly to Tesco's markets in Asia and central and eastern Europe.

"I don't say green shoots (are emerging). I say the decline has slowed and maybe abated, but you never know," he said.

Clarke also said Tesco, the world's third-biggest retailer with a presence in 14 countries, was looking at two or three more markets, but was currently focused on its expansion in China, India, the United States and in financial services.

"I'm looking at (expanding into) two or three (more markets). Do I expect to make an announcement in the next couple of years? No I don't ... because we're absorbing so much," he said.

In a presentation to the conference, Clarke said emerging markets were ever more attractive, in spite of the global recession.

"The large populations and the low levels of retail concentration mean that room for growth is nothing short of phenomenal -- not just in countries that people always talk about, like India and China, but in countries like Egypt, Vietnam and Morocco."

Clarke declined to say whether these three countries were among the ones he was targeting for future expansion.

He also said expanding abroad had become about 15 percent to 20 percent cheaper thanks to a decline in property prices.

EYE OF THE STORM

Tesco's existing foreign markets had ample opportunities for growth, Clarke said.

"We're in America, we're in India, we're in China and then we've got another group of markets that still have not run out of growth, and their footprint is narrow because it's basically hypermarkets and a few small stores.

"If you know the UK, you'll know there's a big group of stores in between, formats that you can go with. Then there's the Internet, then there's services," he said, adding Tesco would expand its financial services business abroad, but only after it had established itself in Britain.

Tesco's international sales and trading profits currently account for just under 30 percent of the group total.

Clarke defended the supermarket group's recent decision to scale back its U.S. expansion plans and abandon a forecast for when the business might break even.

"We've opened into the eye-storm of a recession and that's been very difficult," he said, adding he was as confident about the U.S. business's long-term prospects as on the day it opened.

Separately, Tesco said it was investing 150 million pounds on a UK relaunch of its Clubcard loyalty scheme.

At 0955 GMT, Tesco shares were up 1.4 percent at 349.8 pence, valuing the firm at 28 billion pounds ($42 billion).



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