Tesco doubles size in Poland with HIT purchase

Tesco has almost doubled its size in Poland with the acquisition of the privately owned HIT hypermarkets for an undisclosed sum. However, Tesco said the deal was worth less than 2.5 per cent of its market value, capping the cost at £420m.

The deal includes 13 hypermarkets, two stores under construction and a number of sites for development. The HIT stores made profits of about £12m last year on sales of £337m. Tesco already operates 47 stores in Poland including 15 hypermarkets with sales of £390m last year.

The deal makes Tesco Poland's leading operator of hypermarkets, well ahead of French rival Carrefour.

David Reid, Tesco's deputy chairman, said the deal would enable Tesco to introduce a centralized distribution system and lower its operating costs.

The Tesco market is highly fragmented and even after the deal the group will have a market share of only about 3.5 per cent.

The deal adds to Tesco's growing operations in central Europe. It claims to be the leading supermarket group in Hungary, the Czech Republic and Slovakia.

By the end of the year the supermarket group aims to have 84 hypermarkets in central Europe and 72 in Asia. Tesco still has research teams in China and Japan, though has yet to decide whether to open stores in those countries.

"Most of the western retailers, including Carrefour, have been investing heavily in Poland," Ian Macdougall, an analyst at Williams de Broe, said. "This gives them market leadership. It's a good position to be in."

Tesco's Mr Reid, said: "It was a competitive process which took 18 months and we are very pleased to have come out on top. It was a good price on which we can make good returns."

HIT's stores, which are attached to shopping malls, have an average 75,000 square feet of selling space, slightly less than Tesco's stores. The stores were previously owned by a family-controlled German company.

Other markets being examined by Tesco include the United States where it is operating an online service on behalf of Safeway.

In the UK it is looking at expanding in both fixed-line and mobile telephony, and car retailing.

UK market share figures out earlier this week showed that J Sainsbury was growing more quickly than Tesco though overall growth in June had slowed.

According to Taylor Nelson Sofres, Tesco is still well ahead with a market share of 25.9 per cent, ahead of Sainsbury's with 17.7 per cent.

Shares in Tesco climbed 5.75p to close at 240p yesterday.