Tesco is reportedly exploring the sale of its Central European operations, including 561 stores across Hungary, the Czech Republic, and Slovakia. This move marks a further retreat from its once-ambitious international expansion plans, as the company focuses on its core UK and Ireland markets. The European division generated $4.5 billion in revenue and $115 million in adjusted operating profit last year, contributing to Tesco's total adjusted operating profit of $3.2 billion.
This potential sale follows a pattern of divestments for Tesco, which previously sold off its businesses in South Korea for $4.2 billion in 2015 and its Thai and Malaysian operations for $8 billion in 2020. The company also faced a significant setback with its failed Fresh & Easy venture in the US, which resulted in a write-off exceeding $1 billion. Tesco's CEO in 2007, Sir Terry Leahy, had confidently predicted that half of the group's revenues would come from overseas within a decade, a vision that has clearly not materialized.
The decision to potentially exit Central Europe is seen by analysts and shareholders as a positive step, allowing Tesco to concentrate on its domestic dominance, where it holds a 28.2% market share. Its market share significantly outweighs that of its next two competitors, Sainsbury's (15.2%) and Asda (11.5%) combined. Shareholders have expressed satisfaction with the "decluttering exercise," which has contributed to a doubling of the share price in the past five years. Tesco has not commented directly on the rumors, stating, "We never comment on rumor or speculation."
The company's European profit had reportedly fallen due to increased competition and rising regulatory pressures in the region. Tesco had previously considered selling this division over a decade ago during a period of asset sales aimed at stabilizing its finances. The move underscores the difficulty of global food retailing, a challenge even for giants like Walmart with its past struggles with Asda in the UK, as local tastes and market dynamics often prove complex for international replication.
