Kipa supermarket. (Photo Credit: Tesco)
Tesco's failed attempts to save its Turkish unit
UNITED KINGDOM
Wednesday, May 28, 2014, 05:20 (GMT + 9)
After three months’ discussions the UK largest chain Tesco carried out with various parties over the future of Turkish Kipa unit, there has been no agreement.
This has been the latest setback for Tesco's chief executive, Philip Clarke, who is trying to reduce the firm's exposure to tricky overseas markets while he tries to improve trading at home, The Guardian informed.
As the executive tries to turn around falling sales and profits at the core UK business, he has already pulled out of underperforming businesses in Japan and the US at the cost of a GBP 1 billion (EUR 1.2 billion) writedown.
The store sources reported that Tesco will now accelerate plans to focus the business on its heartlands comprising just over 100 stores around Izmir and the western Aegean coast, minimize capital spend and improve profitability.
Turkey was the UK retailer’s worst-performing international unit in its last financial year, with same-store revenue dropping 7 per cent, Bloomberg news agency reported.
Therefore, the firm was in talks with local supermarket group Migros Ticaret AS and beverage company Anadolu Endustri Holdings AS about possible deals, which would have mirrored Tesco’s partnership last year with China Resources Enterprise Ltd. as the UK grocer retreats from underperforming international operations and concentrates on trying to revive sales at home.
“It’s disappointing they can’t find a partner, but not altogether surprising given the poor results from the country,” said Andrew Gwynn, an analyst at Exane BNP Paribas in London.
And the analyst added: “In terms of options, they could start by closing some of the underperforming stores, but there are a lot of them.”
Following the collapse of talks, Tesco Kipa will implement plans to stem losses, including “a retrenchment to the Aegean region” and selective store closures.
Darren Shirley, an analyst at the stockbroker Shore Capital, said Tesco faced a struggle against the heavy discounter BIM: "Time will tell if losses ease in a market where, like much of central and eastern Europe, hypermarkets have not set the pace in recent times," he wrote in a note.
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