TESCO AIMS TO QUADRUPLE CHINA REVENUE IN 5 YEARS

Photo Source : telegraph.co.uk

(Reuters) - Tesco (TSCO.L), the world's No.3 retailer, plans to quadruple revenue in China to about 4 billion pounds over the next five years by more than doubling its number of hypermarkets to more than 200.

The British group said on the second day of a trip with analysts to Asia that its expansion in China would deliver significant levels of profitability and returns, although it did not provide figures and target dates.

Tesco runs 82 hypermarkets and four "Lifespace" shopping malls stretching along eastern China.

A business of over 200 hypermarkets would be similar in size to Tesco's estate of largest "Extra" stores in its main British market, where it dominates the retail landscape.

China offers an "unrivalled opportunity in a large, rapidly growing market," Tesco said in slides published on its website, noting the country is forecast to have 221 cities of over 1 million people by 2025, compared with 35 in Europe now.

But some analysts warn about the cost and risk of expansion, as rivals such as Wal-Mart Stores Inc (WMT.N) and Carrefour (CARR.PA) are also expanding in China and Tesco's returns on overseas investments have recently fallen.

On Sunday, the group said overseas returns were starting to improve and would build as economic recovery gains hold and its assets mature.

"HAPPY FUN SHOPPING PLACE"

Tesco said it aimed to have over 150 leasehold hypermarkets by 2014-15, as well as around 50 freehold 

"Lifespace" shopping malls, each with a hypermarket, and to have a further 30 malls under development.

It confirmed plans to invest about 2 billion pounds in the "Lifespace" malls, which are focussed mainly in second- and third-tier cities, over the next five years, with development partners providing a further 3-4 billion pounds.

The malls, whose Chinese name Le Du Hui means "Happy Fun Shopping Place," typically occupy 75,000 square metres spread over four floors, with a Tesco hypermarket at the bottom and other shops, restaurants and a cinema on upper levels.

Tesco said around 600,000 customers a week were visiting its existing four "Lifespace" malls and the average occupancy rate was 89 percent.

It plans to open two more malls this financial year through February and said it had around 90 cities on its radar as having potential for a mall.

(Editing by David Holmes)