Tesco to Close 13 Hungarian Stores due to Profitability Law

By Margit Feher

BUDAPEST--The Hungarian arm of U.K. retailer Tesco PLC said on Monday that it will close 13 of its stores to remain profitable, in keeping with a new law that requires large food retailers to generate a net profit for two consecutive years in order to stay in business.

Tesco, which currently operates 222 stores in Hungary and is the country's biggest food retailer based on annual revenue, will cut several hundred jobs in the country 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 thirteen stores," said Nigel Jones, CEO of Tesco-Global Aruhazak Zrt., the U.K. firm's Hungarian subsidiary, in an emailed video interview.

The new law was adopted late last year after parliament approved a steep increase in food-quality inspection fees for the biggest retailers. Another new law was approved in December requiring 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.

Write to Margit Feher at [e-mail]; Twitter: @margitfeher

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