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Tesco: Further retreat from overseas ambitions

Despite its popularity in central Europe, Tesco has struggled to succeed in Poland after 25 years of its operations in the country. The company opened its first stores in Poland as early as 1995, at a time when the country was transitioning to a free-market economy. As Tesco was pioneering the hypermarket store format in the country, over the next two decades it quickly expanded its network to 450 stores and Poland became its second-largest foreign market (after Thailand) by store numbers.

However, as the retail landscape in the country has been evolving and new players entered the market, Tesco started trailing behind. The company has found it hard to further expand its market share competing with low price discount chains. Tesco’s Polish market performance was further hindered by its inability to overcome the loss of trade from the Sunday trading ban that began in 2018.

In response to falling revenues and profits, Tesco increased its focus on profitability, which included store closures and simplification of store operations. Despite the efforts, the Polish division failed to attain revenue growth and profitability, as achieved by the other central European markets, following Tesco’s restructuring plan.

The company has been looking to exit Poland over the past 18 months, but its network is too large to sell off to a single rival or investor. In the 2019-20 period, Tesco sold or closed 62 of its stores to various buyers. In June 2020, the company announced it is selling a further 301 stores to its rival – Netto. This deal, subject to antitrust approval, will leave Tesco with just 19 freehold stores in Poland that it will sell independently.

The announcement of leaving Poland came just months after completely exiting Asia, where Tesco was also struggling. As a result of Tesco’s slimming down strategy, its only remaining overseas stores outside central Europe are now in Ireland.