Tesco's China partner says profits under pressure
The state-controlled Chinese retailer, which took 80 per cent of a joint venture with Tesco after the British group stopped trying to make it alone in the world's second largest economy, posted a net loss of HK$71m ($9.2m) from a profit of HK$920m the same time last year.
China Resources also said: "In the short to medium term, the Group's overall profitability may come under significant pressure as it takes time to turn around the recurring loss-making Tesco stores in China and integrate them with its other supermarket businesses."
Under the deal struck between the two companies last October, China Resources agreed to merge Tesco's 134 stores and 11 "Lifespace" shopping malls into its nearly 3,000-strong group of Vanguard supermarkets and convenience stores, which operate in China and Hong Kong.
At the time, former Tesco CEO Phil Clarke said expected the China business to be profitable.
Tesco struggled to succeed in China for several years before selling off the majority of its business to China Resources. This was even though the British retailer tried hard to localise its business, for example by selling live turtles and toads out of its Shanghai store.
Source: ft.com
