Kesko faces the recession head-on
The financial environment in the trading sector quickly deteriorated during 2008. As a result of consumer prudence, construction and other major household acquisitions in particular declined. In the current cyclical conditions, it is an advantage that the steadily developing grocery trade accounts for nearly half of our business.
More for our customers
The K-Group stores are visited daily by
about one million customers.
Success in the consumer-
customer business
requires that the
customer and brand
promises are delivered
at every visit to the
store. Kesko has several
successful chain
and product brands.
Brand development
work is a key to
future success. In
practice this also
means increasing the
efficiency of marketing
and developing
measurement
methods.
The importance
of electronic customer
communications
is increasing
in the trading sector.
Customers visit
web sites to look for product
information to support their purchasing
decisions. Various online services and
interactivity are increasing. Kesko and its
subsidiaries develop electronic customer
communications and online store sites.
Kesko holds a strong position in online
sales of home and speciality goods with
its NetAnttila and Kodin1.com concepts.
In autumn 2008, we launched Konebox.fi
selling home technology and in spring
2009, we will open the Budget Sport
online store.
Year of reorganisations and
investments
In 2008, Kauko-Telko, Tähti Optikko and
K-Rahoitus were divested and real estate transactions were completed. The gain
on the disposals totalled approximately
€180 million.
Thanks to the excellent profit performance
and well-timed company and property
disposals in recent years, Kesko's
liquidity is strong and solvency is high.
The cost-effectiveness of investments is
assessed more carefully and they are
postponed, if necessary. Our aim is to
maintain the good financial position
and benefit from lower construction costs
when building new store sites.
Work and productivity
Kesko's strategy focuses on healthy
growth, sales and services provided to
consumer-customers, and responsible
and cost-efficient business models.
Kesko carried out major organisational
reforms during 2008. A decision was
taken to divide Kesko Agro, joining it
partly with Rautakesko and partly with
Konekesko. A decision was also taken to
intensify cooperation of Anttila, K-citymarket's
home and speciality goods and
the other home and speciality goods
chains particularly in goods purchasing,
management and customer relationship
management. The activities aim at costefficiency
and improvements in customer
service. The divisions implemented several
cooperation negotiations aimed at
cutting the number of employees.
The trading sector wage solution made
in 2007 will increase labour costs over
several years. As growth expectations are
weakening, various rationalisation activities
will be necessary. We will be opening
new stores and will also recruit new
employees for them. Availability of labour
force is improving at the moment, but
competition for skilled personnel will, in
the longer run, intensify.
In order to maintain our competitiveness
we have to be able to increase work
productivity. The work and productivity
programme covering Kesko and its chain
stores was launched at the end of 2007.
The aim of the programme is to
strengthen our competitiveness by
increasing employees' work productivity.
There are extensive projects underway
concerning the automation of activities
and processes. We continue the systematic enhancement of employee competencies
and are looking for new, effective
forms of training. Our units have also
started projects focusing on improving
wellbeing at work.
Steady development in the grocery trade
Kesko operates in many product lines and markets at different stages of development in several countries. In the weakening business environment, the stability of Kesko's grocery trade in particular contributes to levelling cyclical changes. In addition, Kesko's business model, in which retailer entrepreneurs are, to a large extent, responsible for retailing, is competitive even in hard market conditions. Retailers' creativity and responsibility have proved to be strong attributes in the changing operating environment. In 2008, the growth of the Group's net sales slowed down as a result of the more difficult business environment. Operating profit excluding non-recurring items decreased on the previous years' record results, but remained at a reasonable level.
A pioneer in corporate responsibility
Kesko has been a trading sector pioneer in corporate responsibility for years and been recognised internationally for this work. We have drawn up a new responsibility programme for the years 2008– 2012. The programme sets concrete targets for the areas of fighting climate change, responsible purchasing and employees' wellbeing. We have, among other things, signed a trading sector energy-efficiency agreement and committed to saving more than 65 GWh of energy by the end of 2016. The agreed savings target is significant, as it corresponds to the annual consumption of about 2,600 one-family houses at the annual level.
Attitude and competence in customer service
Kesko and the K-Group stores have
around 50,000 employees in eight different
countries. Most of them work in customer
service duties, in which competence
and the right attitude are decisive.
We want to ensure the best customer
satisfaction and our future competitiveness.
In 2008, the Kesko Group recruited
some 12,000 new employees and
K-instituutti, the K-Group's own training
centre, had some 25,000 participants in
its training events.
I wish to extend my warmest thanks to
all Kesko employees for their diligence
and commitment to our objectives. I
would also like to thank our shareholders,
K-retailers and their employees, and
all our partners for their trust and cooperation
during 2008.
Matti Halmesmäki
President and CEO