CRV shutting Tesco stores to start integration

By Zhang Ye Source:Global Times Published: 2014-11-5 23:23:01

China Resource Vanguard Co (CRV), one of the country's largest supermarket operators, said Wednesday that the company has started to close some Tesco stores in the Chinese mainland to push forward integration with the UK retailer's China unit.

This comment came against the backdrop of media reports that CRV would shut down all six Tesco stores in East China's Shandong Province.

A PR representative with CRV refused to comment on this, but told the Global Times Wednesday that several Tesco stores in different regions would be closed, following the strategic layout for the joint venture between CRV and Tesco.

In late May, Hong Kong-listed China Resources Enterprise (CRE), CRV's parent company, completed the takeover of Tesco's Chinese mainland business and put it into a new joint venture with an investment of HK$22 billion ($2.84 billion).

Tesco holds 20 percent in the venture while the rest belongs to the Chinese side.

By the end of Saturday, the data sharing between CRV stores and Tesco stores in southern China had been completed, and the company plans to realize the sharing in northern China by December 1, said the PR.

According to an integration plan issued by CRV in May, the comprehensive backstage data integration is expected to be done by the end of the year, and from March 2015, the performance of Tesco stores in the mainland is expected to be improved.

The integration is a bumpy road and may not go very smoothly as scheduled, as CRV believes that they fully own Tesco's Chinese mainland business while the UK retailer regards itself as a partner in the tie-up, said Chen Yuefeng, deputy editor-in-chief of Beijing-based business magazine China Chain Store.

Also, the integration will cost lots of money, likely further worsening CRV's financial performance in the face of the country's sluggish brick-and-mortar retailing industry, Chen told the Global Times Wednesday.

CRE's latest interim report showed in September that the retail division's attributable profit to the CRE declined by 29.6 percent year-on-year in the first half of the year, mainly due to the acquisition of Tesco's Chinese mainland operation.

Analysts said that Tesco has not been doing well in the mainland partly due to slow expansion. It entered the mainland in 2004, operating 155 stores and shopping malls currently, while its foreign peers Carrefour and Wal-Mart tapped the market in 1995 and 1996 respectively. As of 2013, Carrefour reportedly runs 236 hypermarkets on the mainland. Wal-Mart has over 400 stores in the market as of May.

Although Tesco does not perform well in China, Chen still believes the transaction can benefit both.

Tesco has a strong supply chain in South China and East China, which supplements CRV's operations, he said.



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