Foreign aisles

19 June 2005

The value of the retailer s international arm isn t properly appreciated by investors. Returns are improving, and investment is pouring in. And rather than being a mature market, the UK is still growing strongly too.

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Tesco, the UK retailer, will update the market on trading to the end of May this week.

The group has 20% of its turnover coming from outside the UK. It has operations in countries including Hungary, Thailand, Korea, Ireland and is beginning to invest in China. Last year, total international sales grew by 13% to £7.6bn, and operating profit was up 21% to £370m.

Cash return on investment (CROI) has increased to 11% in the international businesses. Within this, the cash return on likeforlike stores in the four largest international businesses is running at over 15%.

In the financial year to the end of February 2005, Tesco invested £2.4bn in its business globally. Of that, £746m was on the international business, while £1.7bn was in the UK. The group's return on capital employed rose to 11.5%.

In the UK, 1.5m square feet were added in 2004/05, bringing the total selling area up to 24m square feet. Tesco says it aims to continue this rate of growth, from a combination of extensions and new stores.

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