Tesco scales down in Poland
Britain’s biggest supermarket chain Tesco has announced the closure of four hypermarkets and a distribution center in Poland.
A ban on Sunday trading and growth of discounters has hit the retailer's bottom line, says CEO Dave Lewis. The plan is to close four supermarkets as sales continue to disappoint.
The stores, two in the south and two in the north and one of Tesco's three Polish distribution centers, in Poznan, will close this year.
It is not the first time Tesco faces problems in Poland and the British supermarkets chain has been scaling back for many years.
The problems in recent years have forced the company to simplify management structures, reduce store administration and close unprofitable outlets.
For example, the meat, fish and delicatessen departments will no longer be filled with specialists and the manned staff canteens and restaurants will also close.
Reorganizing to save
Martin Behan, managing director of Tesco Poland, said the closures would support profitability:
"The liquidation of unprofitable stores is a permanent element of business processes in a trading company," he says.
"These changes are part of our work to improve the performance of operations in Poland to levels achieved by Tesco in other Central European countries".
In the last year, Tesco has closed 62 stores in Poland as part of reorganization plans aimed at saving 1.5 billion pounds by 2020.
Sunday trading ban
The last move is due in part to Poland's ban on Sunday shopping, which has forced retail networks across Poland to compensate for the lost days of trading.
For some it is good because costs go down.
"We've lost a number of trading days again in the quarter and that just requires us to keep constantly improving the efficiency and productivity of that business in what is quite a challenging market," stresses Dave Lewis.
The Polish government said in February it was reviewing the impact of the Sunday shopping ban, fueling speculation that it might relax the rules in this election year.
Discounters have been the least affected by the new trading law.
Biedronka and Lidl have adjusted their strategies to accommodate the ban. They have used promotions, with discounts as high as 70%, and extended opening hours on Fridays and Saturdays.
The two companies have amongst the lowest prices in the Polish grocery market. This is due to discounters' no-frills operations, part of a business model to keep costs down.
Both also limit store staff numbers to keep costs down. This means much of the focus of their employees is on stock replenishment. Check-out lines in their stores tend to be longer and staff interaction with shoppers limited.
Hence Tesco has found it hard to compete on price.
Losing market share in Great Britain
Britain's “Big Four” supermarkets all lost market share in the 12 weeks to May 19, market research company Kantar says, as like-for-like sales flatlined at leader Tesco and fell at Sainsbury’s, Asda and Morrisons.
- Tesco’s market share fell to 27.3% from 27.7% a year ago.
- Sainsbury’s and Asda had equal market share of 15.2%,
Sainsbury’s fell 1.7% to 13,5%.
- Asda fell 0.2% to 15%.
- Morrisons fell 0.4%, to 10.4%.
German discounters Aldi and Lidl continued to record strong growth giving them a record combined share of 13.8%. (Kantar).
Tesco has a workforce of about 460,000, of which 300,000 are active in Britain. Tesco is also present in countries such as India, the Czech Republic and Hungary. (Tesco)
Sources: Tesco, The Guardian, Reuters, RetailUpdate.