So much for a clean break.
Tesco yesterday revealed the details of its long-awaited exit from Japan, first announced last summer. Having failed to find a buyer for the loss-making business - its smallest international arm - Tesco will pay £40m to local heavyweight Aeon to relieve it of 117 Tokyo stores under the Tsurakame, Tesco and Tesco Express banners.
The news was greeted with a resigned shrug by analysts.
“Given ongoing trading losses of about £30m after approaching a decade in the market, Tesco appears to our minds to have taken the correct approach with funded withdrawal,” Shore Capital’s Clive Black told investors, calling the news “a disappointment of sorts” but one that would remove a “distraction” from its bid to get the UK back on track.
“I don’t think anyone really thought they’d make any money for the business,” chipped in Philip Dorgan of Panmure Gordon. “Paying £40m for someone to take it off their hands isn’t a bad result. Frankly, in this climate it’s nice to just get rid of it.”
Inevitably, some observers suggest the move bodes ill for Fresh & Easy and are wondering what the final bill would be for a US exit.
“The US has had a number of not just reminders, but clear messages that there has to be an improvement, or the same will happen to it,” Black added.
As Daily Bread wrote back in August, the US and Japanese businesses are too different to draw any definite conclusions. But the underwhelming 3.6% sales growth last year - well short of what Philip Clarke said he was hoping for - doesn’t fill you confidence.
An intriguing sidenote to yesterday’s news came when Aeon flirtatiously hinted that it could benefit from Tesco’s knowledge of other Asian markets, like Thailand and Korea.
Perhaps Aeon is looking for a bargain in California too.