Tesco considers Asia exit
today Dec 9, 2019
Britain’s biggest retailer Tesco has signaled a further retreat from its once lofty global ambitions by starting a review of its remaining Asian businesses, which could result in a sale of those Thai and Malaysian operations.
Celebrating its 100th anniversary, Tesco is five years into a UK-focused recovery plan launched by Chief Executive Dave Lewis after an accounting scandal capped a dramatic downturn in trading.
In October Lewis declared Tesco’s turnaround complete and said he would step down next summer.
“Tesco confirms that, following inbound interest, it has commenced a review of the strategic options for its businesses in Thailand and Malaysia, including an evaluation of a possible sale of these businesses,” it said in a statement on Sunday.
The company said the review was at an early stage and gave no details of the approaches received.
“No decisions concerning the future of Tesco Thailand or Malaysia have been taken and there can be no assurance that any transaction will be concluded,” it added.
Tesco trades from 1,967 stores in Thailand and 74 in Malaysia. In the six months to Aug. 24 the businesses together generated sales of 2.6 billion pounds ($3.3 billion), up 1% at constant exchange rates, and operating profit of 171 million pounds, up 42.3%.
At a capital markets day in June, Tesco had said it was well placed to grow in Asia, particularly in Thailand, citing an opportunity for 750 new convenience stores over the “medium term”.
But under Lewis the focus of investment has been the UK, spending nearly 4 billion pounds on the acquisition of wholesaler Booker last year.
In 2015 Tesco sold its South Korean arm to a group led by private equity firm MBK Partners for $6.1 billion. A year later it sold its Kipa business in Turkey to Migros, the country’s largest supermarket chain.
Under its previous management Tesco made costly exits from Japan, the United States and China.
If Tesco does quit Thailand and Malaysia, its only overseas operations, apart from Ireland, will be its loss-making central European division, consisting of stores in the Czech Republic, Hungary, Poland and Slovakia.
Lewis will be succeeded by Ken Murphy, a former executive at healthcare group Walgreens Boots Alliance, at a date yet to be confirmed.
Shares in Tesco closed at 232.2 pence on Friday, valuing the business at 22.8 billion pounds.
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