Tesco to sell Polish stores in bid to focus on Central Europe

Tesco PLC (LON: TSCO) announced on Thursday the sale of its business in Poland to Salling Group A/S, Denmark’s largest retailer, in a move intended to capitalise on Tesco’s stronger market position and good growth prospects in Central Europe.

Back in early March, Tesco also announced the sale of its Thai and Malaysian business unit, for a consideration of £8.2 billion.

It has been a lucrative year for Tesco so far, with preliminary quarterly results indicating a 30% increase in sales during the coronavirus pandemic as customers swarmed supermarkets to panic-buy essentials when the UK’s lockdown measures first came into force. Although the initial boost to supermarkets appears to be trailing off as life returns to relative normality, Tesco is maintaining the plan to pay its full year dividend of 9.15p.

Details of the sale

The Polish transaction involves a total of 301 stores – to be rebranded over an 18 month period – as well as associated distribution centres and the head office. In the 2019/20 financial year, the 301 stores being sold generated sales (exc. VAT and PFS) of £947 million. Their combined gross assets totalled £681 million over the same span.

Privately-owned Salling Group A/S is 100% owned by the Salling Foundations from Denmark, and serves a whopping 11 million customers every week across Germany, Poland and Denmark. The company boasts 50,000 colleagues and an annual turnover of approximately £7 billion.

CEO statement

Tesco Chief Executive, Dave Lewis, released a statement on the company’s sale:

“We have seen significant progress in our business in Central Europe, but continue to see market challenges in Poland. Today’s announcement allows us to focus in the region on our business in Czech Republic, Hungary and Slovakia, where we have stronger market positions with good growth prospects and achieve margins, cashflows and returns which are accretive to [Salling] Group.

“I would like to thank all of our Tesco Poland colleagues for their dedication to serving customers in Poland over many years. The energy and commitment they have shown over the past two years transforming Tesco Poland to a two-format business has been incredibly impressive. We see this transaction as the best way to secure the future of the business for our colleagues and customers in Poland”.

Investor insight

On Thursday afternoon BST 15:20, Tesco’s share price slipped a minimal 0.044% or GBX -0.10 to GBX 226.90. The company’s dividend yield stands at 0.040%, its P/E ratio at 23.79.

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