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Tesco’s Eastern European business is here to stay as plans revealed for new Polish distribution centre

Tesco's Eastern European business

Tesco is to open a major new distribution hub in Poland, ending speculation the grocer was gearing up to abandon the Eastern European market.

The new centre will be located in Poznań in the centre of the country and will be Tesco’s main warehouse for the region, servicing 140 of its stores from September.

Adam Manikowski, chief executive of Tesco Poland, said the new centre, which is being developed by British-based company SEGRO, will reduce the annual mileage of its lorries by 12.9pc.

Some commentators had suggested that the supermarket giant’s European operations could face the axe, after legislative changes in Hungary, including new rules on Sunday store closures and a new tax, hit profits there.

Sales in Tesco’s central and eastern Europe business, which encompasses Hungary, Poland, the Czech Republic, Slovakia and Turkey, have fallen amid immense competition from European discount retailers such as Lidl and Aldi.

Tesco closed nine of its stores in Poland in the last financial year, and expects to reduce its footprint further in the current year, according to its latest results statement.

But Darren Shirley at Shore Capital said: “I think Tesco is committed to its business in Poland for as long as it has a business there. It will unlikely be interested in doing a ramp up of stores but might be looking at driving efficiencies.”

He added that the grocer would be unlikely to find a buyer for the whole estate if it wanted to sell it, but would probably consider an offer if one emerged.

A spokesman for Tesco said that the opening of the new distribution hub indicated that it was “business as usual” in Poland.

The news comes ahead of a Tesco’s annual general meeting tomorrow, where boss Dave Lewis will update investors on progress to turn the company around after it posted a record £6.4bn loss in February 2015 on the back of property writedowns.

Since then, the business has faired better, and Tesco posted a £162m pre-tax profit for the year ending February 27.

Part of Mr Lewis’ strategy has been to sell off the non-grocery business, including Dobbies Garden Centres, which Tesco offloaded last week to a group of investors led by Midlothian Capital and Hattington Capital, two private equity houses, for £217m.

Tesco has already jettisoned its South Korean business Homeplus for £4.2bn, and sold its Giraffe restaurant chain to the owner of Harry Ramsden’s restaurants, Boparan, for an undisclosed sum.

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