Hungarian Law Hits UK Retailer Tesco

The Hungarian unit of UK retailer Tesco PLC is close 13 of its stores in Hungary to remain profitable, in keeping with new legislation that requires the country’s major food retailers to generate a net profit for two consecutive years in order to stay in business.

Tesco, which has operated in Hungary since 1995, operates a total of 222 stores there and is the country’s biggest food retailer based on annual revenue. The company is also Hungary’s third-largest employer and announced that more than 500 jobs would be lost as a result of the new laws.

“In response to all of the legislation over the last few months, we’ve completed a strategic review of our business, and to remain profitable for the long-term, we’ve made the decisions to close 13 stores,” said Nigel Jones, chief executive (CEO) of Tesco-Global Aruhazak Zrt., the UK company’s Hungarian subsidiary, in an emailed video interview.

The new law was adopted late last year after Hungary’s parliament approved a sharp increase in food quality inspection fees for the biggest retailers. Another new law, approved last month, requires nearly all retailers, including Tesco, to remain closed on Sundays from March 15, 2015.

The new measures are aimed at benefiting small, mostly Hungarian-owned retailers, government representatives have said.

Tesco recently announced that in the UK it plans to close 43 unprofitable stores and reduce capital expenditure by £1bn as part of a cost-cutting drive.

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