Tesco chief executive Dave Lewis has said that the retailer plans to close an additional 32 "unprofitable" stores in its Polish operation, on top of the 14 already closed, as it seeks to streamline its business in the country.
Describing Poland as "our only business that is currently not profitable", Lewis said that the retailer is "much more mindful of the mix of products that we are selling [in Poland], to give us a chance of becoming profitable".
Lewis was speaking to the media following the publication of Tesco's third-quarter results, which indicated group sales growth of 0.5% in the third quarter. However, the group's Central Europe division posted a 3.0% decline in sales for the period, impacted largely by Sunday closing regulations in Poland.
While the nuances of Tesco's Central Europe operations (taking in Poland, Hungary, Czech Republic and Slovakia) are different, Lewis said that Tesco is working on streamlining its operations in general across the region.
"Being prepared to walk away from sales that are unprofitable is something that's been a feature of the last four years at Tesco," he explained. "In Central Europe, we're doing that around general merchandise, mainly electrical, media, small domestic appliances.
"I think that the most important thing is that we need to constantly and critically lower the cost of the operations in markets where retail prices are lower than what we are used to in other parts of Europe," he added. "That's really what we're trying to do, and we've come a long way this year."
Brexit Contingency
During the media call, Lewis also addressed how the retailer is planning for Brexit, given the scheduled date for the UK's departure from the EU is approaching at the end of March.
He said that the retailer has "sensible contingency plans in place, given, like everybody, we don't know what the final outcome will be".
The biggest challenge, he noted, would be around fresh food, "where you can't stockpile", adding that "like all food retailers we would be very keen that there is no friction at the border, given that the UK imports about half of the fresh food that it eats".
On whether Tesco has already commenced stockpiling foods in the event of a no-deal Brexit, Lewis said that while the retailer had not stockpiled "in any way that would be significant", it had engaged with suppliers on potential contingency measures.
"We've looked at all of the product categories, as well as those categories that matter most to customers, we've looked at the life cycle of those products and where they are produced, all of that detail," Lewis said, adding that the retailer has sat down with suppliers to address their productive capabilities, and whether they have commenced holding stock, describing it as "very objective, rational planning".
"We've worked through every single category in the big volume lines and built deliberate plans for each of them," he said. "We will use our network and their network as appropriate as we develop into the end of March."
Discounter Expansion
Finally, on Jack's, the discount retail operation launched by Tesco last September, Lewis said that there are now eight outlets trading under the Jack's banner, with plans to extend this to between 12 and 15 within the first three months of 2019.
"We will wait until we've done the 10 to 15 and then we will review," Lewis said. "I'm very happy with the feedback we have done so far lots of lessons learned, lots of opportunity ahead of us, but it would be premature to say what happens after this point."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
