Multinational retailers in Poland may be forced to cut expansion plans in the country as a new levy aimed at helping domestic businesses is likely to affect profitability.
European retailers such as Jerónimo Martins, Carrefour and Auchan, will pay about €360 million a year more from July, due to a tax imposed by Poland's government. The 1.4 per cent tax of sales revenue is aimed at larger companies in a bid to promote local businesses.
The levy, according to the Financial Times, is making retailers reconsider expanding in the country. “Nobody wants to operate more stores any more,” said one CEO of a foreign retailer. “Due to the tax, it is all about making existing stores more efficient and increasing sales density.”
The tax may force retailers to cut costs or operations as, in a market where profit margin is around 2-3 per cent, any more major expenses may push companies into the red.
Head of consumer goods and retail for central and eastern Europe at PwC, Krzysztof Badowski, said the new levy gives retailers little choice in their decision-making.
“Across the board, regardless of their format, nationality and size, retailers in Poland work with paper-thin margins,” he said. “So take away 1 per cent, 1.5 per cent and they will need to find the money somewhere else.
“Retailers are definitely slowing down their expansion plans here. They might look at attempting to change their approach towards a franchise or agency concept.”
© 2016 European Supermarket Magazine – your source for the latest retail news. Article by John Golden. To subscribe to ESM: The European Supermarket Magazine, click here.
