China shopping syndrome: Tesco to double number of hypermarkets

TESCO, THE world’s third largest retailer, plans to quadruple revenue in China to about £4 billion (€4.7 billion) over the next five years by more than doubling the number of its hypermarkets to over 200.

The British group said on the second day of a trip with analysts to Asia that its expansion in China would deliver significant levels of profitability and returns, although it did not provide figures and target dates.

Tesco runs 82 hypermarkets and four “Lifespace” shopping malls stretching along eastern China.

A business of over 200 hypermarkets would be similar in size to Tesco’s estate of largest “Extra” stores in its main British market, where it dominates the retail landscape.

China offers an “unrivalled opportunity in a large, rapidly growing market”, Tesco said, noting the country is forecast to have 221 cities of over one million people by 2025, compared with 35 in Europe now.

But some analysts warn about the cost and risk of expansion, as rivals such as Wal-Mart and Carrefour are also expanding in China and Tesco’s returns on overseas investments have fallen. On Sunday, the group said overseas returns were starting to improve and would build as economic recovery gains hold and its assets mature. – (Reuters)