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SearchThe British chain is reviewing options for its Central European operations, which employ more than 22,000 people. A sale has not been confirmed; Lidl is among the potential interested parties, according to City A.M.
Tesco is considering what to do with its businesses in Hungary, the Czech Republic and Slovakia, a move that could mark another step in the British group’s international retreat. A sale, however, has not been confirmed: in July, the company responded to reports by saying it did not comment on rumours or speculation.
The Financial Times reported in July that Tesco was exploring options for its Central and Eastern European operations with banks. EFE picked up the report the following day. In October, City A.M. revisited the possibility of a sale and said Lidl was among the interested parties. The outlet said Tesco could update the market that week, but that expectation does not amount to an announcement of a sale.
The regional operations include 561 stores, according to the latest annual report cited by the Financial Times, and employ more than 22,000 people. Any change of ownership could therefore have implications for a large workforce across the three countries. The available sources do not detail any possible employment changes, nor do they indicate that layoffs, closures or changes to working conditions have been announced.
The division generated £4.5 billion in revenue the previous year, compared with the group’s £66.6 billion. Even so, its contribution to adjusted operating profit was comparatively small: £115 million out of a total of £3.2 billion, according to figures published by the Financial Times.
The business faces competitive pressure from discount chains such as Aldi and Lidl. Tesco has also pointed to difficulties in Slovakia and regulatory pressure, and reduced the value of its stores by £75 million, according to the Financial Times report. These factors help put the review into context, but do not in themselves show that the company will sell.
A divestment would reduce Tesco’s presence in continental Europe and concentrate its activities further in the United Kingdom and Ireland. Nicholas Found, an analyst at Retail Economics, told City A.M. that a sale would make strategic sense if the right price could be achieved: it would allow the group to simplify its business and free up capital for those markets. He also warned of the risk of disposing of an asset for less than its value and noted that Tesco would have no urgent need to exit.
Richard Hyman, an independent retail sector analyst, considered that a sale would make sense as part of Tesco’s gradual retreat towards its core business. These are analysts’ assessments, not decisions or forecasts confirmed by the company. Ken Murphy, the chief executive, had described the regional business as “an integral and successful part of the group”, according to comments reported by the Financial Times.
For now, the key point for businesses, workers and potential buyers is that Tesco is exploring alternatives but has not confirmed a transaction. The price, timetable and terms of any potential sale, or its consequences for the workforce, are also not publicly known.
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