Philip Clarke, the chief executive of Tesco has announced that the company will be pulling out of Japan by selling off its stores. Clarke said the reason for the withdrawal was because Tesco’s would not be able to expand enough to properly succeed in the country. He commented, “We just won’t be able to make the business scalable in Japan, we will be conducting a sale process over the coming months.”
Tesco in Japan saw a decline in growth last year by nearly 10% making it the weakest growth for any of the countries the retailer is present in. The company employs over 4,000 people in the country and rumours of a withdrawal have been circulating for some time. Tesco operates nearly 130 stores in the country, most of which are in Tokyo, the company has said that only half of them are profitable. Tesco has a strong presence in other Asian countries including Thailand, Malaysia, China and South Korea.
Seymour Price analyst Kate Calvert has welcomed the move saying, “Tesco has never made good enough returns in Japan, the market will benefit from the move to sell of this part of the company. The decision, financially, is largely immaterial for the group.”
Tesco entered Japan in 2003 with the takeover of an existing discount supermarket chain. Since that time it has grown its presence with other acquisitions. Clarke has also said of the withdrawal, “weak economic conditions have made growth in the region slow.
“Also, we have found it difficult to persuade people to change the store they choose to shop at. We do not anticipate having any trouble selling our assets in the country, they should be quite attractive to any other chain looking to expand their presence.” Tesco shares rose 1.3% on Wednesday.