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Tough year ahead for Spar Magyarország

Last year brought decrease in numbers for the Hungarian unit of retail chain Spar. Expenditures on the on-going rebranding of the Plus chain and the crisis tax are likely to further negatively impact declining turnover this year as well.

The Hungarian Spar chain saw 4.04% less turnover in 2010 than the previous year, and was forced to lay off 6% of its staff, executives of Spar Magyarország Kereskedelmi Kft revealed. The consolidated turnover of the Hungarian stores was HUF 381.32 billion in 2010. The number of employees was 13,390 at the end of the year.

According to CEO Péter Feiner, the negative change in turnover is partly due to declining consumption, but it is also a result of the refurbishing campaign the company executed last year mainly on the former stores of earlier purchased competitor chain Plus. The time during which these shops were closed added to the decline in aggregate turnover.

Spar restructured 57 former Plus shops and renovated two of its own ones in 2010. The supermarket chain launched three new stores, while it also had to close one. Now Spar has 399 stores in Hungary: 368 Spar (Spar, Plus and City Spar brands together) and Kaiser’s supermarkets, and 31 Interspar hypermarkets, on a total size of 399,530 square meters.

According to Feiner, the recent drop in consumption is not only because of customers’ fallen purchasing power, but also a result of some new trends. Although shopping in Hungary is still primarily driven by low prices, the significance of daily or weekly discounts has grown. “An important change is that people have started shopping more times for smaller amounts, and customers more often choose little shops near their homes,” Feiner told the Budapest Business Journal.

According to Spar’s report, the company is in contact with 1,000 local suppliers at present. The share of local products is around 75-80% of the total, which is even higher in the case of fresh products, executive manager Kornél Saltzer, responsible for Spar’s supply, said. Vegetables, fruits, dairy and meat products are produced mainly in Hungary, he added. Saltzer singled out the negative consequences of bad weather on local agricultural products, because of which less local produce has met the quality Spar requires.

Besides the total turnover, executives also disclosed the amount of taxes Spar paid last year. According to their report, the company paid taxes of more than HUF 10 billion in 2010, not including the crisis tax levied on the retailer in the later stages of last year. Feiner said in an earlier interview that the amount of the extra burden the company had to pay last December was around HUF 6 billion. He also said that time that the company was only able to pay it with the help of its Austrian parent group Aspiag AG.

Spar Magyarország has ended every business year since 2008 in the red, HUF -11 319 million (after taxes) in 2008 and HUF -14,814 million (after taxes) in 2009. This year is likely to be another loss-maker. Although the executives made no forecasts for the company’s 2011 performance, Feiner said that he expects “serious losses” for the retail sector this year.