Tesco closes Shanghai superstore

A 10-year-old Tesco store in Shanghai will be closed in the end of May, the UK retailer Tesco Group announced Wednesday, shortly after rival Wal-Mart Stores Inc shut down three superstores in the Chinese mainland in April.

The property owner has no intents of renewing the lease contract, so the firm decided to close the supermarket on May 31, an PR representative with Tesco China, who wished to be anonymous, told the Global Times Wednesday.

"We will continue to select suitable sites around the country and seek the opportunity of opening new stores. The group remains confident in the Chinese market," she said, adding that shopping cards registered in the store will continue to be effective in Tesco's over 20 stores remaining in Shanghai.

However, analysts attributed this shutdown to its underperformance as a result of the sluggish domestic retail industry since 2012.

Tesco closed four supermarkets in the second half of 2012.

According to a financial report released in April, the company's sales in China increased by 1.1 percent year-on-year during the fiscal year ended February 23, 2013, compared to a 4.1 percent growth rate over the same period in the 2011-12 fiscal year.

Besides the ongoing industrial downturn, high operating costs are another reason for the closure, Yan Qiang, a partner of Beijing-based Hejun Consulting, told the Global Times Wednesday.

Foreign retailers are facing a more difficult time in China than their domestic rivals because the former spend more on management and often rent larger areas, he said.

US retailer Wal-Mart, for instance, set a fixed size for its supermarkets in China, usually covering 20,000 square meters each, meaning very high rents, Zhang Wenze, a Beijing-based industry insider, told the Global Times Wednesday.