On Wednesday morning, Spar Hungary held a press conference: at the event, the management presented the business results of the past year. Gabriella Heiszler, the managing director of the domestic Spar, already talked about the expected results in an interview with Telex in February, when she said that 2023 would be a better year than “2022, which brings a big minus”. Heiszler, on the other hand, did not provide specific numbers about the after-tax profit at Wednesday’s press conference, saying only that Spar was unprofitable in the same way in 2023 as in 2022, and they expect a roughly similar result (a HUF 13 billion loss was recorded two years ago).
When asked by journalists whether Spar is planning to leave as a result of threats from the government, Heiszler replied, “as far as I am talking with the owners, we are not planning to leave”. Heiszler gave an evasive answer to whether Viktor Orbán’s family received a request for a stake: “I have been working for Spar for eighteen years, during those eighteen years there were many requests from both domestic and foreign parties, but they all came to the owner. This is a proprietary issue, so I can’t talk about it.”
Heiszler also spoke about the fact that he was the one from Spar whom Minister of National Economy Márton Nagy invited to see him at the end of March. Heiszler did not mind this, in his opinion, “such a tense situation can only be resolved through dialogue”, so he considers this conversation as the first step. “Obviously, it was a tense conversation, as it happened in a crisis situation, but I think it was concluded in a reassuring way.” He added that the closure is still in progress, but they are working both internally and externally to resolve the conflict.
Spar Hungary’s Wednesday morning press conference – Photo: Anna Bánáti / Telex
Regarding the European Commission, he says that the special tax, which has been in effect since 2020, has been challenged in several proceedings. “We think that it has several points that are not only economically unreasonable, but also illegal. This is a legal procedure that will take many years, it will certainly drag on for a few more years, but it will eventually come to fruition.”
As for whether legal action can really be taken against Spar by the government, Heiszler says that he has not yet received any such action, “but of course they can do it at any time”.
Sales increased, everything else less so
In 2023, the Hungarian Spar’s sales reached four figures for the first time in billion forints. The company closed the year with HUF 1,023 billion, which represents a 15 percent increase – the franchise business accounted for HUF 134.5 billion of the turnover. The stores expanded to a lesser extent, the total area (including franchise stores) increased from 443,000 square meters to 447,000, according to Heiszler, due to the market environment due to the law on shopping malls.
The amount of investments decreased significantly in 2023, compared to 32 and 31 billion forints in the previous years, the company was able to spend only 22 billion forints on investments. Heiszler says in this regard,
the special tax “forces us to think seriously about what we spend, how much is left for investments”. The special tax paid last year was HUF 30 billion.
Last year, five new stores were opened and four were remodeled, and most of the amount spent on investments went to this; at the same time, the managing director emphasizes that the number of converted shops is small from a business point of view, “there should be more”. In terms of volume decline, Spar saw a decline of around four per cent compared to an overall market decline of eight per cent.
The company structure was also significantly transformed, a new company was created next to Spar Magyarország Kereskedelmi Kft., to which real estate assets related to stores and logistics were transferred. Commercial and operational activities remained in the original company. As for the reason for this, Heiszler says that they saw it as safe, and there are several commercial companies in Hungary that similarly separate them. “From an economic point of view, it may not be rational, because you may have to pay a local business tax twice, but the owners think that it is safer in the long run.”
At the beginning of March, Spar complained about Hungary to the European Union, saying that it violates EU law that mainly foreign store chains have to pay a special tax of 4.5 percent, while those operating in the franchise system only pay 0–1 percent. The Austrian chain also objected to the price cap. Not long after, the Austrian Spar manager Hans Reisch said about the Hungarian government: “They told us relatively openly that if the state acquired a stake in our company, the situation would be much easier. We are now hoping for Brussels.” In the interview, Reischt talked about how external factors make it impossible for them to operate profitably in Hungary, the price cap and the special tax costing the chain a total of 120 million euros, i.e. about HUF 47 billion.
While leading the Austrian government, he also sent a letter to his 14,000 Hungarian employees on March 25, in which they wrote that the situation in Hungary was particularly difficult in 2023, and it still is now. “Spar Hungary would be profitable if it were not for the extreme price and tax rules in Hungary, which do not exist in this form in any other EU country.”
The Hungarian government initially denied the pressure, but later several politicians threatened Spar. János Lázár said: “Now that the Austrian spice connoisseur, Spar, has behaved in this way, I have suggested to the government that we no longer tolerate lying and baseless claims from them, and rather buy them by the skin.” He then added: “The company will pay the price for what it has done in the past few days.” Márton Nagy talked about it, called the manager of Spar and warned that every statement has consequences, and Balázs Orbán, the Prime Minister’s political director, stated that they are looking for the opportunity to seek legal redress from the store chain.
At the beginning of April, VSquare’s newsletter wrote about the Rahimkulov family, previously interested in OTP and Mol, and István Tiborcz also trying to acquire a stake in Spar in Hungary with the help of the government. In this regard, BDPST Zrt., owned by Tiborcz, stated that neither the company nor Tiborcz plans to invest.
At the beginning of April, the European Commission finally began to investigate the complaint submitted regarding the special Hungarian retail tax. The Hungarian Spar has not spoken in the conflict so far, the dispute is being handled in Austria at the parent company level.
Even before the dispute between Spar and the Hungarian government, in January, the Austrian Minister of Economy and Foreign Affairs also wrote a letter to EC President Ursula von der Leyen, in which they also wrote: the Hungarian special retail tax puts foreign investors who want to operate in Hungary in a disproportionately difficult situation.
Profits have been declining for years
Before 2022, the Hungarian Spar regularly closed with a profit, although in recent years the profit has continuously decreased. The decline began even before the coronavirus epidemic: while in 2018 they recorded a record profit of nearly HUF 20 billion, in 2019 this decreased to HUF 16.4 billion, and in 2021 only HUF 5.3 billion was included in this line. 2022 affected the entire retail sector, almost everyone, including Spar, became unprofitable, the company closed with a HUF 13 billion loss, mainly due to the special tax and increased energy costs.
Spar Magyarország Kereskedelmi Kft. was founded in 1990, the first Spar opened in Tata in 1991, and there are currently a total of 641 stores in the country. The Austrian owners invested more than one billion euros in Hungary.
At the end of February, we conducted an interview with Heiszler, where the managing director spoke, among other things, about the fact that sometimes they can tell the Ministry of National Economy their points of view personally, but they cannot influence the big, relevant decisions. We also wrote more about the conflict between Spar and the government, our analytical article about it can be read here.
