British retail giant Tesco is likely to keep its operation in Thailand despite selling its largest foreign asset in South Korea to improve its poor balance sheet.
One of the many reasons Tesco is not expected to sell its Thai operation, Tesco Lotus, it that it is among the top three retail operators in Thailand and the most recognised retail brand along with 7-Eleven and Central, an industry source said.
Tesco's sale this week of South Korean operation Homeplus was the first large divestment by its boss Dave Lewis, who wants to slash debt and recover from an accounting scandal and the loss of market share to discount stores Aldi and Lidl.
"I don't think the Thai operation will be sold, as it is healthy and profitable with a lot of market potential and expansion," the source said.
Tesco Lotus said in a statement that it was confident in Thailand's growth opportunities and continued to expand its retail operations here.
It has recently opened new hypermarkets and Tesco Express stores nationwide.
The Thai retail market has vast potential, supported by economic expansion that remains higher than that of Europe, the growth of middle-income consumers and the shopping behaviour of consumers who prefer to buy goods in modern outlets.
In addition to store openings, Tesco Lotus's second regional distribution centre costing 2.5 billion baht in Surat Thani province will become fully operational at the end of this month.
The distribution centre shows the confidence of Tesco in the strong fundamentals of the Thai economy. It is poised to serve a growing customer base in the South.
Earlier, Tesco Lotus chief executive John Christie said the company had continued to invest in Thailand as planned since the start of this year by opening new stores in strategic locations nationwide and helping to strengthen local economies.
This year's investment plan includes the opening of 50 Tesco Lotus Express stores and five hypermarkets. It has successfully achieved its expansion plan for the Express format.
Tesco Lotus expects to benefit from growing demand from the Asean Economic Community and trade along borders, especially in areas close to Laos and Cambodia.
"Tesco Lotus is confident that the government's plan to boost the spending power of low-income earners will help to stimulate not only the retail sector but also the economy as a whole," Mr Christie said.
Tesco Lotus operates about 1,400 stores, of which 1,100 are Express outlets.