Tesco still confident despite downturn

UK-based Tesco PLC, the world's third largest retailer, remains confident about the prospects of the Chinese market despite economic headwinds dragging the retail sector down, a company executive said Tuesday during the ongoing Summer Davos in Tianjin.

China's retail sector will undergo a long period of competition and restructuring, but "we have never thought of leaving China," Lu Haiqing, senior vice president of Corporate Affairs at Tesco China, told the Global Times in an exclusive interview.

China's retailing industry is at a nascent stage compared with developed markets such as the US, Europe and Japan, Lu said, pointing to the tremendous growth potential of the market.

Even if the nation is hit by a downturn in the economy, it remains on a much higher growth trajectory than most of the economies globally, he said.

Lu's remarks came amid lingering rumors that big foreign retailers including Tesco and France-based Carrefour are considering selling off their China businesses, under pressure from growing competition and rising operation costs in the country.

The recent closing down of several Tesco outlets in China is not a reflection of the retailer's loss of confidence in the market, but more of a normal adjustment from a profitability point of view, said Lu.

"Sometimes we go one step further, and sometimes we take one step back. But overall we are going forward," he said.

Tesco confirmed to the Global Times in late August its plan to shut four supermarkets in the country in a strategic shift.

Lu also said that "recent rumors about Tesco's spinning off its property business in China are not true," adding "all we did was merging the property business into our retail business."

Tesco will continue investment in the nation's property market to support the company's retail business, he noted.

Carrefour, the world's second largest retailer, also rebuffed rumors about exiting the Chinese market in a company statement in late August, although it confirmed pulling out of the Singapore market by year end.

There has been rising concerns over lackluster growth in the country's retail sector. During the first eight months of the year, growth rate in the country's retail sales was 14.1 percent year-on-year, compared to the growth rate of 16.9 percent during the same period in 2011.

The current economic climate has weighed on the nation's supermarket sector, Zhao Yajun, a retail industry analyst with Cinda Securities Co, told the Global Times, citing factors such as an increase in rental and labor costs.