Thursday morning was a busy one in Hungarian domestic politics, first Prime Minister Viktor Orbán gave a speech at CPAC Hungary, then Prime Minister Gergely Gulyás and Government Spokesperson Eszter Vitályos held a Government Information. At the latter, the amendment of the Basic Law necessary due to the Child Protection Act was discussed, but the price of gasoline and the purchase of an airport were also discussed, as was the SPAR-gate. Minister Gulyás informed the Austrian management of the department store chain through representatives of the press:
proceedings are initiated in court due to damage to reputation
In other words, those who expected that the storm between the government and the store network would die down will have to be disappointed.
- After the Government Info, we turned to the Hungarian subsidiary for a reaction, but we were informed at the Hungarian headquarters that SPAR Austria is responsible for answering the topic.
- We were not the least bit surprised by this, because the Hungarian government is not at war with Bicske, but with Salzburg.
- At the same time, the Austrians indicated that they did not wish to comment on the developments.
Disarmament is still a long way off
It is worth recalling that the parties in this board game entered the starting field on March 11, after the Financial Times made it public news: the parent company of a department store chain with 641 stores in the domestic retail market appealed to the European Union regarding the extra profit tax introduced in Hungary in 2022, accusing it of discriminatory its nature, its imposition in conflict with EU legislation.
What’s more, the burden increased from 4.1 percent to 4.5 percent this year for sales over HUF 100 billion. The relevant market players, including SPAR Hungary, could find out about this in the Hungarian Gazette of May 31, 2023. It is an interesting coincidence that the deadline for the publication of the annual reports was on that day, which indicated a loss-making rather than a profitable operation, but not the least bit of extra profit.
In the case of SPAR Hungary, for example, it didn’t sound good at first that – in connection with the high inflation – sales revenue jumped by more than HUF 100 billion, from HUF 663.8 billion to HUF 766.2 billion, but the truth soon became clear in the after-tax result: the 2021 5 .3 billion HUF profit turned into a HUF 13.1 billion loss by 2022.
Since inflation was 14.5 percent that year, while food prices rose by an average of 26 percent, in practice, incomes that increased by a quarter meant mere stagnation.
When learning the financial results for 2023 at the end of May, we will have to take into account that consumer prices rose by 17.6 percent, while the prevailing food prices in the sector were practically the same as a year earlier, by 25.9 percent. In other words, in the case of foodstuffs, a HUF 100 item had to be paid for HUF 160 two years later. The Hungarian wallet had a hard time bearing this, but the analysis of the Index also confirmed that the extra profit appeared in the food industry, not on the merchant side, but mainly on the manufacturer side.
Open helmet fight
The debate only got really angry when the Austrian SPAR leader Hans Reisch claimed to Die Presse that the Hungarian government’s proposal was to obtain a state share in return for a reduction in the special tax. According to the Ministry of National Economy, the pressure is groundless, but let’s add that it is still true that the increase in domestic ownership in retail trade, which was set under the government’s banner, has not happened, which was realized in the banking sector or telecommunications, which are also classified as strategic sectors.
On Wednesday, SPAR Hungary evaluated the year, but at that time we could not yet know the result after tax, as it reported gross turnover instead of net sales, as in previous years on similar occasions.
- It turned out that the company achieved a turnover of HUF 1,023.2 billion last year, which represents an increase of 15.79 percent compared to the previous year.
- The company opened five new stores and modernized four out of almost HUF 10 billion.
- In addition, the modernization of the meat plant in Perbá continued, and important initiatives were launched for the sake of sustainability.
- It was also said that since entering the market in 1991, SPAR has invested a total of HUF 539 billion in Hungary until the end of 2023.
The special tax hurts SPAR
Managing Director Gabriella Heiszler told Index:
last year, SPAR paid almost HUF 30 billion in special tax, such a huge amount naturally affects our operations. It imposes strict cost control on us, and unfortunately, for the first time in the last five years, in 2023, our investment volume also decreased significantly. Of course, we will continue to renovate our stores and open new ones, but at a much slower pace than would be ideal.
The managing director responded to the press reports about the possible change of ownership by saying that “at the moment, there are 9 major players in the food trade in Hungary, and consolidation has been taking place in this sector for years as well. I have been working at SPAR for more than 18 years, since then I have received several domestic and foreign inquiries, but these are always discussed by the owner and not by the local management”.
(Cover photo: Márton Mónus / MTI)
