Tesco is reported to be in talks with Vanguard part of China Resources Enterprise, the state run retail conglomerate, about merging its 135 loss making stores with the larger retailer. With this Tesco will bring its nine year venture in China to an end. The deal under discussion would leave Tesco with just a 20 % stake and is expected to come at a heavy financial cost.
Tesco has already begun scaling back on its international expansion. Last December, the retailer had announced closure of its loss-making US business, at a total cost of £1.8bn. It has been searching around for a buyer ever since, but has not been successful to date. Tesco pulled out of Japan some years earlier, but only managed to finally leave the country earlier this year, after paying a local group £40m to take the business off its hands. The most recent media update showed that sales were growing in just two territories: Malaysia and Hungary. Turkey was down 15%, the Czech Republic down 9%, Poland down more than 8%, Ireland and Thailand both down 3%. The company, which posted a drop in profits in April for the first time in two decades, is now expected to focus on the British market.
In a separate move, Germany's Metro AG is said to be pulling out of the consumer electronics business in China and America's Home Depot is closing its home improvement stores.