Tesco ‘in talks’ to exit eastern Europe
Tesco is reportedly considering cutting loose its business in central and eastern Europe in a move to end its expansion outside of the UK and Ireland.
The supermarket giant has hired bankers to explore the possibility of a sale of its operations in Hungary, the Czech Republic and Slovakia, according to the Financial Times.
A Tesco spokesperson said: “We never comment on rumour or speculation.”
Tesco has made several attempts to conquer the shopping baskets of overseas shoppers in the last three decades but has quit the US and Chinese markets in recent years.
The grocer operates 566 stores in central Europe, according to its most recent financial report, including 200 in Hungary, 184 in the Czech Republic and 182 in Slovakia.
Tesco notes ‘competitive intensity’ in Europe
The FTSE 100 company generated more than £4.5bn in revenue across these markets in the year to the end of February, including £1.6bn in both Hungary and the Czech Republic and £1.5bn in Slovakia.
The firm blamed its European arm’s 0.9 per cent constant rate decline in operating profit on the sale of some mall properties in the previous year and “ongoing regulatory pressure”.
Tesco wrote down the value of one of its Slovakian stores by £75m, noting the challenges posed by the “competitive intensity” of this market.
The potential sale of its European operations would be a significant about-turn for Tesco, with chief executive Ken Murphy previously describing the business as “an integral part of the group”.
The firm’s operations in Hungary, the Czech Republic and Slovakia are “a successful part of the group, and they don’t distract us very much from the core business,” he said in 2023.
Tesco axed US and China operations
Tesco had expanded aggressively into overseas grocery operations – and other sectors including financial services and cafes – at the start of the century but has since pulled back much of its sprawling empire.
After marking its first foray abroad into Hungary in 1995, the grocer founded convenience store chain Fresh & Easy on the West Coast of the US in 2007.
This move turned out to be a failure for Tesco, who sold off the chain and 150 of its stores to private equity firm Yucaipa Companies in 2013, before the operation collapsed into bankruptcy in 2015.
Tesco exited the Chinese market in 2020 after it sold its stake in China Resources Enterprise, the state-run firm with which it had merged its operations in the country in 2014.
The supermarket exceeded forecasts when it made an operating profit of more than £1.3bn in the year to February but last month revealed that its sales growth in the UK is slowing.
Tesco holds a commanding 28.2 per cent share of the UK’s grocery market, more than double that of its nearest competitors combined, Sainsbury’s and Asda.
The firm’s shares were flat on Wednesday at 470p and have gained six per cent in the year to date.