The place to ask China-related questions!
Beijing Shanghai Guangzhou Shenzhen Chengdu Xi'an Hangzhou Qingdao Dalian Suzhou Nanjing More Cities>>

Categories

Close
Welcome to eChinacities Answers! Please or register if you wish to join conversations or ask questions relating to life in China. For help, click here.
Posts: 3442

Emperor

0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

Q: Will other retailers follow Tesco's exit from China?

Tesco will merge its 131 stores in China with the country’s second-biggest hypermarket chain, ending nearly a decade of independent operations in the country as sales decline.

 

http://www.bloomberg.com/news/2013-08-08/tesco-said-close-to-forming-china-joint-venture-with-vanguard.html

 

What are the real reasons behind the exit?

 

The Original Article

 

Tesco Plc (TSCO), the biggest U.K. retailer, will merge its 131 stores in China with the country’s second-biggest hypermarket chain, ending nearly a decade of independent operations in the country as sales decline.

 

The U.K. retailer plans to form a joint venture with China Resources Enterprise Ltd. (291) that will also run supermarkets, convenience stores, and other outlets in China, Hong Kong and Macau, according to statements from both companies. Tesco will have a 20 percent stake in the tie-up with China Resources holding the remaining 80 percent.

 

The agreement would allow Tesco to maintain a presence in the world’s second-largest economy where it’s been closing stores amid greater competition from regional rivals such as Sun Art Retail Group Ltd. (6808) The U.K. retailer is exiting international markets after almost two decades of aggressive expansion into central Europe, Asia and the U.S. took the focus off its U.K. shops.

 

“The deal signals Tesco is exiting China,” Kenny Wu, a Hong Kong-based analyst at JI-Asia Research Ltd. “If I wanted to expand in China I would sustain for one or two years. If you are combining your business as minority shareholder, it’s more like you’re selling it.”

 

Retailers such as Tesco are facing slowing economic growth and rising competition in China, where the economy expanded 7.5 percent in the second quarter from a year earlier, the second straight deceleration. For Tesco “this is a way to salvage themselves,” Wu said.

 

China Resources and Wal-Mart Stores Inc. are China’s second-largest hypermarket operators with an 11 percent share each last year. That compares with a 14 percent share held by Sun Art, backed by France’s Groupe Auchan, according to Euromonitor International. Tesco ranked eighth with a 2.4 percent share.

 

China Resources shares rose 5 percent to HK$25.05 in Hong Kong trading today as of the mid-day break, the most since May 28. Tesco rose 1.1 percent to 369.1 pounds in London yesterday.

 

Tesco, which paid 40 million pounds ($62.2 million) to leave its Japanese joint venture, has also said it will leave the U.S. China Resources would gain market share in the Asian country’s hypermarket industry, where sales will increase 50 percent to 864 billion yuan ($141 billion) by 2015, according to Euromonitor.

 

Weaker Growth

 

Both parties signed a memorandum of understanding yesterday, China Resources said. Vincent Tse, a spokesman for the Hong Kong company, which also owns China’s largest beer brand, declined to comment on the financial details or branding plans going forward. Details are still being worked out, he said.

 

Tesco may pay several hundred million pounds to combine their businesses in China, said a person familiar with the discussions, who asked not to be identified because the talks are confidential.

 

Tesco has 131 stores in China, mainly hypermarkets, and operates some shopping malls where it is the anchor tenant. Their outlets would be combined with about 3,000 Vanguard stores and secure significant cost and operational benefits, China Resources said today. The tie-up would create a business with sales of about 10 billion pounds, Tesco said.

There is no certainty that a transaction will occur, the companies said.

 

Tesco started selling goods in China in 2004 and generated 1.4 billion pounds of sales in the country in its last fiscal year, according to its website.

 

Tesco scaled back its efforts in China last year to focus on building out more profitable businesses, Chief Executive Officer Philip Clarke said in April. The company has adopted a more “cautious stance” in the country and closed five underforming outlets last year to focus on its strongest regions, it said in April.

 

Sales for Tesco’s China stores opened at least a year dropped 4.9 percent in the first quarter amid consumer concern over bird flu and weaker demand for pork following a national food safety scare.

 

Same-store sales fell in 8 of Tesco’s 10 international markets in the first quarter, hurting the overseas unit that makes up about a third of revenue and profit. Citigroup Inc. estimates Tesco’s earnings will drop for each of the next three years after falling for the first time in two decades in 2012.

5 years 41 weeks ago in  Shopping - China

 
Answers (5)
Comments (5)
Posts: 1559

Shifu

0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

This page can't be displayed


  • Make sure the web address http://www.bloomberg.com is correct.
  • Look for the page with your search engine.
  • Refresh the page in a few minutes

Or finally break down and get a VPN I guess.  Ugh.

 

Report Abuse
5 years 41 weeks ago
 
0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

If they're sensible.  The market and nationalistic mind-set are against foreign enterprises winning.  If, by some amazing streak of good luck or genius game-playing they end up at the top of their field they'll be knocked back down again by bogus charges of almost any kind.

Report Abuse
5 years 41 weeks ago
 
0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

I want to see all companies exit China.

 

China is clearly trying to get rid of all foreign independent presence in this country.

 

I am not saying that foreign companies like GSK, for example, have not done wrong, but, bribery is rife in this country.  We all know it goes on everywhere with everyone.

 

Why are they only really targetting foreign companies?

 

No why?  I do.  They want us all gone.

Report Abuse
5 years 41 weeks ago
 
0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

As an aside, Tesco is sht anyway.  They are losing market-share in the UK because they are a mess.  

Report Abuse
5 years 41 weeks ago
 
0
0
You must be a registered user to vote!
You must be a registered user to vote!
0

most chinese supermarkets are copying the methods of western retailers and have more imported items to keep the customers coming back, but i fear the service and quality will only get worse now, but chinese are used to getting bad service and quality, perhaps the victim culture makes it so they feel they deserve this.

Report Abuse
5 years 41 weeks ago
 
Know the answer ?
Please or register to post answer.

Report Abuse

Security Code: * Enter the text diplayed in the box below
Image CAPTCHA
Enter the characters shown in the image.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <img> <br> <p> <u>
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
  • Textual smileys will be replaced with graphical ones.

More information about formatting options

Forward Question

Answer of the DayMORE >>
A: well,,,  just hope all newbies in China wake up real quick to the
A:well,,,  just hope all newbies in China wake up real quick to the idea of there are not really any 'road rules',,,  so, like the little Safety Films we watched in Elementary School said when u were a kid,,,  'look both ways before u cross the street'.  dat sh*t be true here,, haha,, and don't be too surprised when u see a car driving down the sidewalk,,,  cuz long enuf here u will see it a lot...   -- diverdude1