Trading conditions in Tesco's Central Europe division were "meaningfully tougher" over the past year, chief executive Ken Murphy has said, as the division reported a 0.6% decline in sales in the year to 27 February.
This compares to a 8.6% increase in its core UK and Ireland business, while group sales were up 7.0% fo the year.
Speaking during a media briefing, Murphy said that the group's Central Europe operations had "less upside to go after" when the pandemic hit, due to both the structure of the marketplace and changes to legislation.
"Legislation in each of the three countries varied dramatically over the year," he said. There were various restrictions on hours that shoppers could shop our stores, our format in Central Europe is hypermarket and mall-based, and many non-essential businesses were closed down, so there was less reason to come to these malls.
"In addition, our F&F clothing range is a big part of our business in Central Europe, and for a number of months we were unable to sell any of those products."
In March, Danish retailer Salling Group got the green light from competition authorities to complete its takeover of Tesco's Polish operations, meaning the British group now operates in three Central Europe markets: Czech Republic, Slovakia and Hungary.
As Murphy explains, the completion of that deal "allows the team in Central Europe to focus on the very strong businesses we have in each of the businesses that we have in Czech Republic, Slovakia and Hungary.
"We were sorry to lose the Polish business, it really is a great business and it's gone to a great group, Salling Group. We're very grateful to our colleagues in Poland for all the work they have done over the past few years, they have been tremendous during this transition period."
Announcing its full-year results, Tesco said that it is in the process of developing a 'digital customer platform', powered by its Clubcard operation, having doubled the size of its online business in the past year.
"The psychology of it is how do we start to shift people from thinking about Clubcard as a Tesco Clubcard to 'My Clubcard'," Murphy explained. "A Clubcard that works for them, that's personalised and tailored to their needs and that really gives them value propositions, product propositions and involves them in categories that they find exciting.
"That opens up a whole world of possibilities, from helping them to eat better, to more balanced nutrition, to better value on things that are really important to them, to relationships with suppliers who may want to offer them new and differentiated product and get their feedback. There are lots of different possibilities that we see through this platform."
The retailer is also looking to tailor its product offering to meet changing customer dynamics – it recently launched a series of new 'restaurant-style' meal kits, all priced at £20, including Finest Slow Cooked Ox Cheek, Finest Confit Duck Leg, and Finest Ballotine of Chicken, to cater to the growing at-home dining trend.
"It's one indication of our desire to respond to the way customers are thinking about how they would like to eat and how they would like to live," Murphy said of the new range. "It's hard to predict what's coming next; we really react as we see it. But it's a demonstration of how agile we have become as a business and our agility to respond to those needs.
"If demand for it builds we'll create more of them and we'll do more exciting things with it, and if demand falls away we'll stop. We are led by the customer."
Looking ahead to the current financial year, Tesco said that it is 'well set', with a strong improvement in profitability expected, while trading conditions are likely to remain 'volatile'.
"Instead of trying to forsee the future and how customers are going to behave in the future, what we've tried to create is an ecosystem that allows customer to access us however we like," said Murphy.
"This sort of agility is, I think, going to be key – it's something that has stood us in really great stead for the past 12 months. We were the quickest out of the block to respond to the pandemic, and gear up, and it's quite phenomenal to think that a business can literally double the number of online slots in a manner of weeks and take on 45,000 new colleagues. It's incredible."
© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.