In September,the company also celebrated breaking ground on its first South Australian store,which cost $24 million and was set to create 150 jobs.
Kaufland said its existing investments,including purchased properties,would be"discussed with the relevant parties in coming days".
We don’t know anything about it and we need to have a conversation with them. We’ve been trying to get hold of them on the phone.
MAB chief operating officer David Hall
A spokesperson for the Victorian government said it was"disappointed"the company had chosen to withdraw from the market.
"We've worked with them over many months to secure their investment,which would have delivered significant benefits to the state,"they said.
Kaufland's shock announcement also comes just one week after it issued $100 million of shares to its German parent company,tipping the amount invested in the Australian arm to more than $500 million.
The news is a fresh indictment onAustralia's dire retail landscape, which has suffered over the last 12 months as poor consumer confidence and the national bushfire crisis has stymied spending.
Kaufland,with stores which could have looked something like this,had already spent millions on its Australian launch.
Frank Schumann,acting chief executive of Kaufland International,said the company made the decision after"careful and thoughtful consideration"and apologised for the disruption the exit would cause.
The company employs 200 staff in Australia and had poached a number of high-profile retail executives to head up its operations,including former Myer boss Richard Umbers.
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"We would also like to thank our business partners,who offered us great support over the last few years. We would also like to thank the government for being very open-minded to our projects,"Mr Schumann said
"In Europe,we see a great deal of growth potential. We will actively shape the consolidation of the European retail sector,thus further reinforcing our leading position."
The news will likely be welcomed by supermarkets Coles and Woolworths which had feared Kaufland's arrival would prompt price competition similar to the entrance of discount supermarket Aldi in 2001.
Shares in Woolworths and Coles have traded at record highs over the past two days,with Woolworths shares rising 1.1 per cent following the news to close at an all-time high of $41.32. Coles also closed at a similar record high,up 3 per cent to $16.62.
The company's employees will be paid"generous packages"including all entitlements and will be provided with a consultation and support process. They will also be given opportunities to join the company's European operations,where possible.
The Age andThe Sydney Morning Herald understands the company's staff were told about the decision at lunchtime on Wednesday and are"shocked"by the news. Kaufland also had meetings scheduled with suppliers during the week.