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December 8, 2011

THAILAND: Tesco reveals impact of Thai floods

The recent floods in Thailand took 0.5 percentage points off Tesco's total third-quarter sales, CFO Laurie McIlwee revealed today (8 December).

By Dean Best

The recent floods in Thailand took 0.5 percentage points off Tesco’s total third-quarter sales, CFO Laurie McIlwee revealed today (8 December).

Thailand’s worst flooding in decades swept across much of the country in October and November. Hundreds died and thousands were left homeless by the floods, which also wreaked havoc on the company’s industrial network.

McIlwee, speaking after Tesco provided a third-quarter trading update, said over 160 Tesco stores were closed at one stage and all of its distribution centres in the country were closed. Its Thai outlets were also forced to fly in fresh food from other markets.

The cost of the floods to Tesco was “pretty significant”, McIlwee said. “It would be over GBP50m (US$78.5m) in terms of sales, damaged stock, damaged stores, the cost of helping staff in terms of accommodation and supply chain. We’re well insured so there’s not really a profit hit as a consequence but, if the Thai floods hadn’t have happened and we’d have continued the performance that we had in Q2 for Thailand, it would have added another 0.5 percentage points to the overall Tesco group sales growth number. It would have pushed 5.5% up to 6%. It’s been a significant impact for us internationally.”

McIlwee said Tesco’s supply chain was improving but not yet running to full capacity, while three hypermarkets remain closed. However, the retailer expects all its stores to be open by the middle of January.

Munich Re, the world’s largest reinsurer, reportedly said today that it expects net claims from the Thai floods to be around EUR500m. Earlier this week, Swiss Re said its net claims would be around EUR600m and estimated that total market claims would be as much as EUR11bn. 

Tesco was not the only multinational retailer affected by the floods. Casino, the French retailer, saw its Thai business Big C close stores and distribution centres in the country.

Production at two Nestle facilities in Thailand also stopped.

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