British supermarket giant Tesco exits Japan

31st August 2011, Comments 0 comments

Britain's biggest retailer Tesco announced Wednesday that it will exit Japan after deciding to sell its network there of 129 small supermarkets to better focus on other operations in Asia.

"Tesco has today announced its decision to sell its business in Japan," the group said in an official statement to the London Stock Exchange following a major review of its activities across Asia.

The world's third largest retailer by sales added that the underperforming Japanese division is the smallest of Tesco's international businesses.

"We have reviewed our portfolio in Asia and the performance of our business in Japan," Tesco chief executive Philip Clarke said in the statement.

"Having made considerable efforts in Japan, we have concluded that we cannot build a sufficiently scalable business."

He added: "We have decided to sell our operations there and focus on our larger businesses in the region, in line with our priority of driving growth and improving returns."

However, the company added that more than half of the 129 small stores in the greater Tokyo area that operate under the Tsurakame, Tesco and Tesco Express names, actually make a profit.

"Over half of the stores are profitable and Tesco has also developed a strong own label range and a fresh kitchen to supply fish and other products to its stores."

Tesco is the world's third-largest retail group after US-based Wal-Mart and France's Carrefour.

Analyst Kate Calvert, at London-based stockbrokers Seymour Pierce, said that Tesco's departure from Japan would be welcomed by investors.

"While immaterial in group terms, the strategic decision by Philip Clark to finally dispose of its Japanese business will be welcomed by the market for Tesco has never made an acceptable return from the business," Calvert wrote in a research note.

"It follows Carrefour, which swapped its Japanese assets for Tesco's Taiwanese asset in 2005, out of the country.

"Japan will remain a notoriously difficult country to make money out of, as Wal-Mart is also finding, having had a presence in Japan since 2002 through Seiyu (now a wholly-owned subsidiary)."

In reaction to the news, Tesco's share price rallied 1.26 percent to 369.40 pence in morning deals on London's FTSE 100 index of top companies, which was 0.11 percent higher at 5,274.29 points.

Global retail giant Tesco employs 500,000 staff worldwide has more than 5,400 shops in 14 countries around the world.

That includes over 1,400 branches in Asia, where it has stores in China, Japan, Korea, Malaysia and Thailand.

Tesco had entered the Japanese market in 2003 with the purchase of the C2 Network, which ran stores under the Tsurakame brand.

© 2011 AFP

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