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Kesko Group Review by the President and CEO
Review by the President
and CEO
A year of profitable growth for Kesko
The growth of Kesko's business operations strengthened in 2011. Among the four divisions, sales in the food trade and the building and home improvement trade developed well, and growth was particularly strong in the car and machinery trade. Profitability improved in the food trade and in the car and machinery trade. Kesko's solvency and liquidity remained, as in previous years, at an excellent level.
In the food trade, the growth rate of sales exceeded market growth and the efficiency of operations was further improved. Good sales growth of Pirkka products and Kespro strengthened the profitability of the food trade. Major reforms were carried out in the home and speciality goods trade, which adversely affected the profit for 2011. Anttila launched the new logistics centre and the purchasing operations of
Strong programme of capital expenditure continued
Kesko's capital expenditure in growth totalled €425 million in 2011. Store openings included six new
In 2011, Kesko also made a decision to expand business operations in the Russian building and home improvement trade, food trade and sports trade, which offer significant growth potential in the future. Both in the building and home improvement trade and in the food trade, the aim is to open around 10 new stores in Russia by the end of 2015. The total capital expenditure of the building and home improvement trade and the food trade in Russia will amount to approximately €600 million in 2011–2015. Kesko acquired Interport Russia's business operations in August 2011 and at year-end there were 36 Intersport stores in Russia. The aim is to double the network of Intersport stores by 2015.
Kesko's solvency is excellent, which contributes to the implementation of the significant capital expenditure programme. Consumers value easy shopping and inspiring shopping experiences and a competitive store network plays a key role here. At the same time, it is important that the uncertainties related to the development in consumer demand are taken into account when decisions on capital expenditure and their timing are made.
Online services and e-commerce
In accordance with Kesko's strategy, the divisions focus strongly on the development of online transactions and e-commerce services. The increase in electronic information, faster data transfer rates and new terminal devices have changed customer behaviour decisively – customers are increasingly often making purchasing decisions independent of time and place, on the basis of electronic transactions. The trading sector has to respond to these needs by offering interesting and competitive electronic services. At the same time, the trading sector market is changing and competition is becoming tougher as new service providers emerge at home and abroad. Kesko's competitive asset is providing its customers with genuinely multi-channel and reliable services that combine the services of the chains' store network with electronic customer communications and online store services.
Kesko already delivers more than one million online customer orders per year. Orders by NetAnttila online customers and deliveries to Anttila and Kodin Ykkönen department stores are supplied from the new logistics centre in Kerava, launched in 2011. This centre, the most modern in Europe and fitted with the latest warehousing technology, significantly improves Kesko's multi-channel service offering. During the next year, Kesko's capital expenditure in information systems will be considerable, which will enable us to provide the most customer-driven electronic services possible.
Successful work for responsibility
In Kesko and K-stores, responsibility is part of our daily activities. Customers can rely on the fact that their responsible choices start when they enter a K-Group store. Responsible activities are concrete actions that, for example, improve energy efficiency, reduce the amount of waste, offer a safe product range and improve wellbeing at work and working conditions. Kesko's and K-stores' duties include helping customers make choices that are good for their wellbeing and for the environment.
Kesko's work for responsibility has also been recognised in many ways internationally. Kesko has been on 'The Global 100 Most Sustainable Corporations in the World' list, published by World Economic Forum, since it was established. Kesko is also included in several sustainability indexes, such as the Dow Jones sustainability indexes DJSI World and DJSI Europe. Competition for sustainability is becoming tougher year by year and being ranked among the most sustainable companies in the world requires that practices are constantly improved. Kesko's Corporate Responsibility Report was chosen as the best in Finland and the favourite among students in the 'Responsibility Reporting 2011' contest.
The trading sector is an important part of Finland's wellbeing
In spite of the uncertainties related to economic development, consumer demand and customers' purchasing power developed relatively well in 2011. The low interest rate and the high rate of employment contributed to demand.
This year, development in the trading sector will also depend on the trends in employment and consumers' disposable income. The sector's ability to employ and produce services directly or indirectly is significant for the Finnish national economy and the welfare society. If implemented, equal taxes and a rise in the tax rate will cut households' consumption, resulting in a decline in sales in the trading sector, and lowering employment in Finland. An increase in the number of regulations that erode the competitive basis of the trading sector in Finland and the European Union also limits the opportunities to serve customers and operate efficiently.
Corporate Management Board restructured
Merja Haverinen was appointed Senior Vice President, Corporate Communications and Responsibility, starting from the beginning of April. At the beginning of November, Arja Talma transferred from the post of Senior Vice President, CFO to that of Rautakesko's President, and Jukka Erlund was appointed Senior Vice President, CFO. At the beginning of December, Minna Kurunsaari started as Senior Vice President responsible for the home and speciality goods trade and Kesko's electronic marketing and services projects.
Focus on wellbeing at work
Kesko and K-retailers employ around 45,000 trading sector professionals and experts. From the perspective of the availability of labour, there is a major structural change underway in Finland as the post-war generation retires.
This necessitates higher labour productivity and longer careers, which call for high working capacity and wellbeing at work. At the same time, competition for competent and committed employees is becoming increasingly tough. Kesko promotes wellbeing at work in many ways, which means the performance of immediate supervisors and a good working environment play major roles. On the other hand, all of us are responsible for contributing to the good working atmosphere and working capacity.
Thanks to all employees, SHAREHOLDERS, K-retailers and partners
I wish to extend my warmest thanks to all of Kesko's employees for their diligence and for a job well done. I would also like to thank all our shareholders, K-retailers and their staff, and all our business partners for good cooperation in 2011.
Matti Halmesmäki
President and CEO