The extraordinary transformation of the Tengelmann Group has taken another leap, with the sale of its 300-outlet Austrian discount division Zielpunkt to Luxembourg-based investment and restructuring fund BluO.

The extraordinary transformation of the Tengelmann Group has taken another leap, with the sale of its 300-outlet Austrian discount division Zielpunkt to Luxembourg-based investment and restructuring fund BluO.

The move follows an announcement in early May that it intends to acquire the Woolworth variety store chain in Germany. Woolworth has been in administration since April 2009, and its store base has roughly halved from over 300 to the current total of 162. Its financial performance is reported to have improved during restructuring.

The two transactions are in line with the group’s gradual withdrawal from discount food retailing, combined with its renewed focus on its non-food operations, including DIY chain OBI and clothing banner KiK.

The retailer recently announced plans to almost double the number of KiK stores in Europe to 5,000 in the next five years.

The share of food sales within the family-owned conglomerate’s European operations has fallen from 63% in 2005 to an estimated 31% this year, and it looks set to drop further with the exit from the discount food arena.

Despite repeated claims from Tengelmann chief executive Karl-Erivan Haub in the past that the remaining food businesses are still important to the group, a full withdrawal from food now looks to be on the cards.

Of the group’s remaining food operations, supermarket Kaiser’s Tengelmann could face the most imminent threat. The group has already disposed of its stores in the underperforming central German Rhine/Main/Neckar regional division earlier this year.

Planet Retail estimates that up to E200m (£169.67m) needs to be ploughed into remodelling its remaining supermarkets to revitalise the business, but the diminished chain has very little buying power, and the group may decide to invest in the group’s up-and-coming non-food banners instead. Should Kaiser’s Tengelmann be put up for sale, it seems likely that the group’s other major food investment, US-based A&P, would go next.

For some years, Tengelmann has been attracted by the potential of low-price non-food retailing in its core central European markets, and no longer seems happy to struggle with the price-obsessed German food retail business. Given that it is successful in other areas, it would make sense for the once sixth-placed food retailer in Germany to call it quits and refocus on what it does best.

Matthew Stych, research development manager, Planet Retail. For more information contact us on:

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