27th May 2014 10:44
LONDON (Alliance News) - Britain's biggest supermarket chain Tesco PLC Tuesday said it has ended talks with various parties regarding potential options for its struggling Turkish business, without striking a deal.
Back in February, Tesco Kipa, the group's Turkish subsidiary, released a statement saying it was in first stage talks with various third parties regarding "potential options", including a possible sale of the business or a potential tie-up.
However Tesco Kipa on Tuesday, in a statement issued to the Istanbul Stock Exchange, said talks with various companies regarding partnership options have come to an end without being able "to reach an agreement". The group did not state what the discussions had involved. It said it is now focused on improving profits, reducing spending, and expanding its presence in core areas.
"We are committed to driving value from all our businesses and, for Kipa, we believe that this is best achieved by accelerating our plans to focus the business on its heartlands, minimise capital spend and improve profitability," Tesco said in a separate short statement Tuesday.
Tesco entered the Turkish market back in 2003, with the acquisition of Kipa, and opened its first Tesco Kipa store in 2005 in Bodrum. Since then, it has expanded its Turkish operations to more than 190 stores in 20 Turkish cities, although trading has been notably slow in the east of the country.
"The efforts of the team in Turkey are already evident in a stronger customer offer and improved performance and there is more we can do to drive stronger cash generation and returns," Tesco added.
In the group's full year results for the financial year ended February 22, Tesco said its Turkish business had been hit by strong competition and its relative exposure to large store formats, posting a 7% fall in full year like-for-like sales, compared with a 5.4% decline the year before.
Tesco continues to struggle to keep up with better-performing rivals and maintain market share back in the UK, all of which have put increasing pressure on Chief Executive Philip Clarke to perform and drive the business forward, having reported another drop in annual group trading profit for its last financial year, as it saw falling sales in the UK and Europe.
The supermarket chain said that it has now focused the Turkish business on its heartland around Izmir and had seen a gradual improvement in like-for-like sales over the year, while the closure of nine loss-making stores, had helped stabilise trading losses.
"Any future investment will be focused on less capital intensive opportunities in convenience and grocery home shopping," Tesco said in a statement in April.
Tesco launched grocery home shopping in Turkey back in February.
Tesco shares were down 0.3% at 303.20 pence Tuesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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