Tesco Negotiating Turkey Deal
Tesco has had a particularly tough 2012 in the UK, perhaps its toughest in recent memory following its first profit warning in about 20 years earlier in the year . The fallout from this called into question the competitiveness of its core UK operation, which for so long was the pillar of strength that allowed Tesco to take advantage of its size as the world's third largest food retailer by annual sales ( behind Walmart and Carrefour) to venture out into the emerging world.
Having arguably taken its eye of the ball to some extent in the cut throat UK retailing sector as it invested heavily in emerging market growth, Tesco is now trying to win back market share in the UK, which still accounts for about two thirds of its business. However, while rejuvenating its business at home is clearly the primary focus right now, one only needs to look at the performance of Tesco's share price against the wider global food retailing sector ( we are using our own food retail index here for comparison ) it still holds true that it can ill afford to pass on opportunities to strengthen itself in some of its most important growth markets, which after all are still likely to drive growth going forward. Tesco's Turkish unit, Tesco Kipa , is currently negotiating with the domestic retailer Uyum Gida with a view to acquiring a majority stake in the Istanbul-focused retailer with a current footprint of about 55 stores.
Tesco, like many of the other large-cap food retailers such as Carrefour and Walmart, is acutely aware that long-term growth will have to come from emerging markets, where organised food retailing is much less developed than in the UK and US. We have made the point over the past few months that it was unlikely that Tesco would pursue any major deals over the rest of 2012 given the structural issues it is addressing in the UK .
|UK Still Drives Tesco Share Price|
|Tesco/BMI Food Retail Index (31-12-11=1)|