In the week that Tesco announced plans to sell Homeplus, Philip Benton, research analyst at Euromonitor International, says that while Homeplus in South Korea was a profitable business, the focus has been on protecting Tesco’s market share in light of increasing competition from lower priced discounters, such as Aldi and Lidl.
Ever since Dave Lewis was appointed CEO of Tesco last year, he has made strengthening the balance sheet "a priority" for the troubled retailer, says Benton.
He believes that the retailer has recognised that whilst the business remains so diverse, it will struggle to become profitable in the near future.
"‘Drastic Dave’ has been keen to sell off any operations that aren’t pivotal to its core business, with Tesco having already closed all of its Homeplus stores in the UK."
"Tesco’s strategy has been to consolidate its international business - such as in Turkey and China - rather than to expand, which will ensure the company’s reliance on the UK market is set to continue."
The supermarket price wars show no sign of slowing as coinciding with the discounting trend, consumers have also switched to a series of top-up shops benefiting not only discounters but also value variety stores.
"Speculation is continuing to mount that Amazon Fresh’s launch in the UK market is imminent, representing another challenge for Tesco requiring its full attention and making the sale of its South Korean operation Homeplus a sensible one."
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