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Tesco in European growth strategy

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Tesco is planning to nearly double its store space in eastern and central Europe

Supermarket giant Tesco has revealed plans to nearly double its store space in central and eastern Europe in another push for international growth.

The Cheshunt-based group told analysts and investors in Asia it planned to increase selling space in the European region to 44.1 million square feet in the next five years.

Tesco currently has around 850 stores in the Czech Republic, Hungary, Poland, Slovakia and Turkey, which make nearly £7.6 billion in sales, and plans to open new hypermarkets – stores of more than 54,000 square feet – as well as smaller format stores in the region.

The latest plans come shortly after the world’s third biggest retailer revealed its intention to expand in Asia, particularly in China where it aims to quadruple sales to £4 billion over the next five years.

Tesco is looking to expand its international portfolio to offset more sluggish growth in the UK and US. The group now generates 31% of sales and 22% of profits from international operations, compared with 10% and 5% respectively 10 years ago.

Tesco plans to refurbish its hypermarkets in central and eastern Europe, as well as open small, medium and large stores across the region. Refits will include adding at least 5,000 new products, as well as services such as phone shops and pharmacies.

In a presentation, Trevor Masters, chief executive of Tesco’s operations in central and eastern Europe, said: “Our experience tells us that if we give customers the opportunity to shop in multiple formats, we will achieve higher market penetration, increased loyalty and greater brand reach.”

On Monday, the group revealed plans to double the number of hypermarkets in China to more than 200 by 2015. The announcement followed strong sales growth in South Korea, its biggest market outside the UK, as well as India and China, for the nine weeks to October 31.

Asia and Europe director Philip Clarke, who will replace Sir Terry Leahy as chief executive in March, described the international arm as an “increasingly important engine for growth”.

Last month, the supermarket said international growth helped it overcome subdued demand and weak growth at home, as it unveiled a 12.5% rise in profits in the six months to August 28 to £1.6 billion.

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