Tesco would likely be receptive to an 'attractive unsolicited offer' for its Central European operations, should one materialise, a leading retail analyst has suggested.
Clive Black of Shore Capital was commenting following a report in Polish trade media yesterday that suggested that the retailer tried unsuccessfully to dispose of its Polish operation during the most recent financial year.
Various Bidders
The article, on Wiadomościoscihandlowe.pl, also suggested that Tesco might be considering dividing its business into parts and selling them to various bidders, such as Netto, Aldi, Kaufland, Carrefour and E.Leclerc.
On the report, Black noted that while there is no guarantee that such suggestions are true – and that Tesco will be 'a bit miffed' if they are – such chatter doesn't come as a surprise.
'We have been saying for some years that we could see Poland going the same way as Kipa in Turkey, which dipped as an opportunity for Tesco from original expectations,' Black wrote in a briefing note.
'It needed capital and management resource Tesco did not have amidst its crisis days, was stabilised and then sold under the Dave Lewis regime to BC Partners.'
In the case of Poland, he added, Tesco has been active in 'recasting' the business model, including downsizing stores, closing unprofitable outlets and reducing the number of formats it offers.
'Losses have been stabilising and are subsequently coming down for some quarters now, which has underscored our view that Tesco Polska could be running a parallel process for a sale. So, going half circle, the above mentioned stories feel par for the course.
'More broadly, disclosure around Poland's financial losses by Tesco shed light on the other markets in the Group's Central European operations – Czech Republic, Hungary and Slovakia – where it has stronger market positions and arguably some lesser competitive
intensity, which as long-standing watchers surprised us as to the magnitude of underperformance by the problem child but, accordingly, the more robust than anticipated margins and so returns amongst the rest of the class.'
Black added that he has little doubt that having watched the sales process proceed in South-East Asia – it announced the sale of its Thai and Malaysia operations in March – it would probably be 'more receptive' to an offer for its Central European operations, if one was to materialise.
'Stronger Offer'
Commenting on the group's performance in Poland, a Tesco spokesperson told ESM, "We have made significant progress with the transformation of Tesco Poland - fundamentally changing our approach and completing the transition to a two-format model of compact hypermarkets and supermarkets. We continue to invest in improving the shopping trip for customers, making our offer more relevant and compelling, and focusing on great value through our 'Follow the Blue' campaign.
"While these changes have caused some disruption for our customers and colleagues, we are confident that they will allow us to better serve our customers in Poland for the long term."
The spokesperson did not comment on the speculation over the future sale of the Poland business.
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