Tesco gets chance to grow in Japan

SUPERMARKETS giant Tesco could be offered a rare chance to extend its toehold in the tough Japanese market with the reported withdrawal of French competitor Carrefour.

Insiders at the French supermarkets chain have told the Asian Wall Street Journal that it will sell its Japanese stores to generate cash to shore up its ailing European operations.

Carrefour, the world's second-largest retailer after America's Wal-Mart, could raise as much as £220 million from the sale. The company opened its first store in Japan in 2000 and now has eight there.

While Tesco would undoubtedly be interested in a deal, its own strategy in the country has been to build up a presence through the purchase of smaller stores.

It bought the food retail chain C Two-Network, with 80 urban supermarkets, last year for 32.8bn yen (£151.3m) and plans, through C Two to acquire privately owned Japanese supermarket chain Fre'c, with 27 stores mainly in the Greater Tokyo area, taking on more than 2bn yen of debt.

A Tesco executive in Asia said he had not heard of Carrefour's plans before the report, but that the company may be interested in the properties if they hit the market.

'We'd probably have a look, but until now we have focused on buying smaller stores and that's been pretty successful,' he said.

Tesco is following a similar strategy in China, a similar retail market to Japan, where it has agreed to acquire a 50% stake in Ting Hsin International's Ting Cao unit with some 25 Hymall stores for about £140m.

Carrefour is playing its cards close to its chest. A spokesman in Japan said she did not have any information on the reported sale of the Japanese operations.

If they do come on the market, Tesco will face formidable competition for a deal from the world's largest retailer, Wal-Mart Stores, which owns Asda in the UK, and Japanese retail giant Aeon, one of Asia's largest retailers. Spokesmen for both Wal-Mart and Aeon said they had heard nothing about the sale.

Wal-Mart is trying to build up its business in Japan and wants to invest in troubled Japanese retailer Daiei. But, like all foreign retailers, it face big challenges in Japan where they are up against local giants such as Aeon and Ito-Yokado - which owns the 7-Eleven chain among other stores.

The purchase of Daiei, burdened with debt though it is, would be a coup for Wal-Mart which already owns a 38% stake in supermarket chain Seiyu. Together, Daiei and Seiyu would be Japan's biggest retailer with sales of 2 trillion yen (£9.9bn).