Tesco Hungary reportedly mulling more store closures

By bne IntelliNews February 3, 2015

Tesco Hungary is mulling the closure of a further 31 loss-making stores in response to recent legislative changes regarding the retail sector, local media reported on February 3.

Tesco announced the closure of 13 stores in early January, blaming the move on major increases in costs under new regulations that also threaten retailers that report losses in two consecutive accounting years. That is likely to lead to the loss of up to 600 jobs.

The UK grocery retailer is now expected to decide thr future of 31 more Hungarian stores by the end of summer. The outlets in question have never yet reported a profit, Magyar Nemzet reports.

Tesco officials from London are currently in Budapest examining the operations of the Hungarian subsidiary store by store. Local management is awaiting their decision. The 31 stores are located across the country, including Budapest.

The new legislation, passed in late 2014 and set to come into force in March, bans Sunday and overnight trading. It also introduced a 60-fold hike of the supervision fee payable by food retailers. In addition, as of 2017 retailers that report losses for two consecutive years must be closed down. 

The government says large, international retailers have been running at a loss by design, in a bid to increase market share. Critics claim the new regulations will give a leg up to domestic chains, which they say are connected to the ruling Fidesz party.

Tesco was not the only foreign retailer to react to the government’s tough stance. Dutch peer Spar said it will more than halve its investment programme for 2015. The company has some 400 stores in Hungary employing over 13,000 people. 

The Hungarian government claims, meanwhile, that the pullback by Tescos is connected the wider problems of the group. The retailer has also announced closures in the UK, as well as next door in the Czech Republic.

 

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