Tesco Folding China Operations

Tesco Plc (Cheshunt, U.K.) has announced it will fold its Chinese hypermarket chain into the empire run by China Resources Enterprises Ltd. (Hong Kong) and retain a 20 percent stake in the business.

Tesco had grown its China operation to 131 stores since entering the market in 2004. But Bloomberg News reported that it has recently  been closing stores amid competition from regional rivals.

Tesco has been reexamining its international strategies after sales fell at eight out of Tesco’s 10 international businesses in the first quarter and international trading profit slumped 22 percent in the 12 months ended in February 2013.

The hypermarket giant has said it will leave the U.S. after years of losses there. It said it almost two decades of expansion into entral Europe, Asia and the U.S. has taken the focus off its home market, which accounts for about two-thirds of its sales.

The next domino to fall is said to be Turkey, where business is declining. Turkey was Tesco’s worst performer in the first quarter ended May 25, 2013, with same-store sales down 16 percent, after a 10 percent drop in the previous three months.

Tesco’s Kipa business in Turkey has about 191 stores, and suffered a loss of about £20 million last year. The company has said its Turkish market share is less than 2 percent.

Tesco’s Turkish pricing and promotional strategy “wasn’t quite right” in the first quarter, ceo Philip Clarke said in June. Also, a shift by Turkish shoppers toward local stores has meant hypermarkets “are currently not the strongest performers,” Clarke said at the time.