Tesco looks ready to sale its Asian branch
Tesco may exit the Asian market, after the recent developments in Thailand and Malaysia, where the retailer decided to put its operations put into a strategic review, announce IGD Asia, quoting sources from the company. "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. 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," informed the retailer in a statement.
Tesco's position in both markets is of No.2, with Thai operation generating sales of £4 billion through a chain of almost two thousand stores, including large stores, convenience stores and online. The Malaysia business is smaller but reaches sales of over £800 million.
Tesco's operating margin is now higher in Asia than in any of the other regions in which it operates. In H1 2019/20, margins reached 6.7%, far ahead of the UK and Ireland on 4.2%, or Central Europe's 2.2%. Key here been a shift in strategy in Thailand, with major changes to Tesco’s sales mix and promotional strategy and the ending of bulk selling. Tesco has also accelerated a material restructure of store and office operations and simplified the operating model of its large stores, while in Malaysia it continued to pursue its strategy of repurposing existing stores to make them stronger retail destinations with strong value messaging to drive volumes.
In 2012, Tesco decided to sale its business in Japan and the move was followed three years later by the leave of the South Korean market. News of the review follows plans shared by Tesco in June to dramatically increase its presence in Thailand. Following trials to reduce operating costs and shift the product mix more towards food, Tesco said it now saw the potential for a further 750 Express stores in Thailand over the next three years, a far more rapid rate of expansion than any other part of Tesco.
The company's decision comes as Dave Lewis prepares to step down as Group CEO after next year's full-year results in April. He will be succeeded by Ken Murphy, the former COO and President of Global Brands at Walgreens Boots Alliance.
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