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UPDATE 1-Retailer Spar cuts back hard on Hungary investments
December 17, 2014 / 12:02 PM / 3 years ago

UPDATE 1-Retailer Spar cuts back hard on Hungary investments

* Budget cut to 25 mln euros from original 59 million

* Spar blames recent tax hike hitting major retailers

* Retailer to focus on boosting franchise network

BUDAPEST, Dec 17 (Reuters) - Austrian retailer Spar will scrap over half of a planned 59 million euro ($75 million) investment programe in Hungary next year, it said on Wednesday, blaming recent tax changes targeting major players in the sector.

Prime Minister Viktor Orban’s government increased food safety fees on top retailers in Hungary such as Spar, French Auchan or Britain’s Tesco. Lawmakers on Tuesday approved a trading ban on Sundays from 2015.

Before the tax changes, Spar, which has over 400 shops in Hungary, had planned to invest 59 million euros in 2015. That will be cut to just 25 million euros and the company will focus on boosting its franchise network instead, it said.

Spar said it will only finish investments already in the pipeline, such as opening three new stores in Budapest.

“Our investments will total 25 million euros next year, this involves only the investments that we have already signed contracts for,” Spar Hungary chief executive Gabriella Heiszler told a news conference.

She said the planned investments would have created about 600 new jobs, which will not now materialise. The company is responding to tax changes which will lift Spar’s food safety tax bill to about 9 billion forints ($36 million) next year from just 325 million forints in 2014.

However, investments next year would still exceed a 10 million euro trough when retailers were hit with another special tax under Orban’s previous term in office, she said.

Heiszler also said Spar, which employs over 13,000 people, would review its marketing spending in Hungary and aim to negotiate down rental prices with property owners to curb costs.

She expressed hope that the Sunday trading ban would not affect sales, adding that Sundays accounted for about 8 percent of weekly turnover, meaning its was one of the weakest trading days for Spar.

That proportion is higher for large supermarkets according to a survey by market research company GfK. ($1 = 0.8033 euros) ($1 = 251.4500 forints) (Reporting by Gergely Szakacs; editing by Keith Weir)

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