Economy 22 January 2015, 12:14pm

bauMax to exit Hungary, close 14 stores - XXXLutz to move in

Portfolio

Austrian home improvement centre operator bauMax AG has announced its exit from Hungary. The decision, which follows “due consideration", was made due to difficult economic conditions, the company’s management said on Wednesday. The 14 stores to be closed in Hungary could be taken over by an Austrian furniture giant.

bauMax wants to give its full attention to the Austrian, Czech and Slovakian markets and switch to a new sales concept in these countries, the company said in a statement.

Michael Hürter, Chairman of the Board of Directors at bauMax AG, said in a statement to state newswire MTI that although they had every intention to stay in Hungary, they must focus all their energy on the other three countries and say goodbye to the Hungarian market, due to the difficult economic conditions.

bauMax primarily offers building materials, wood, sanitary products, and electricity installations, as well as tiles and gardening services. bauMax AG was founded in 1973 and is based in Klosterneuburg, Austria. It has been present in Hungary since 1992. Last autumn, it closed one of its Budapest stores (in Pestszentlőrinc).

bauMax will close all of its remaining 14 stores in Hungary by April. The sites will be taken over by Austrian furniture giant XXXLutz.It said the Austrian, Czech and Slovakian units will take over the new sales concept presented in October 2014 - which proved to be successful - in the autumn of this year.

The following bauMax units will be closed in Hungary:

Budapest, Szentendrei út (3rd district)
Budapest, Váci út (4th district)
Budapest, Pesti út (17th district)
Budapest - Csepel
Budaörs
Debrecen
Győr
Kecskemét
Miskolc
Nyíregyháza
Pécs
Sopron
Szeged
Székesfe hérvár

Complaints about gov't measures

bauMax was one in the group of German and Austrian firms that had written a joint letter to the European Commission expressing concerns about policy developments in Hungary in late 2010.

The companies that signed the letter were insurers Aegon AG (AEG), Allianz SE and AXA SA, Austrian home improvement firm bauMax AG, Czech energy firm CEZ, German utilities E.ON AG, RWE AG and EnBW Energie Baden-Wuerttemberg AG, telecommunications company Deutsche Telekom AG, Austrian oil and gas company OMV AG, Dutch financial group ING Groep NV, Austrian retailer SPAR AG, and German retailer REWE Group.

Hungary levied hefty taxes on energy, retail and telecommunications firms in 2010 to meet its budget deficit targets and get out of the European Union's Excessive Deficit Procedure (EDP). Earlier it had also imposed extra taxes on the financial sector, limited the powers of the Constitutional Court on tax matters so that affected companies cannot appeal the steps, and effectively nationalized its private pension funds to generate additional budget revenues.

"With the economic policy of the (Prime Minister) Orbán government, the economic downward trend could not be changed and there are fears conditions are further deteriorating," the companies said in the letter, after detailing the above measures.

Enikő Győri, Hungary's EU affairs state secretary, rejected the above complaints. "I firmly reject that these taxes would be against foreigners ... it is not true that this regulation is discriminative and against foreign (firms)."

No wonder bauMax takes a hike

Hungary’s DIY market has been in crisis since 2007, György Vámos, general secretary of the National Trade Federation, has recently told news portal origo.hu, noting that the exit of Bricostore in 2012 was already a warning sign. The DIY market goes hand in hand with the housing market, he added. People spend less on home improvement than before, as the housing market has just started to recover. There are few home buildings and home reconstructions.

bauMax and other home improvement chains are also put into a difficult position by the newest legislation banning stores from opening on Sundays. This sector will be one of the biggest losers of the new shopping rules, as these are typically stores where people go on the weekends.

XXXLutz to take over

Swedish furniture behemoth IKEA, Austrian furniture store chain Kika are to get quite a serious rival in XXXLutz, an Austrian furniture giant that is to take over the bauMax stores and move in.

The Austrian company is a key player in Europe’s furniture and home furnishing market. It was established in 1945 and has more than 220 stores in Austria, Croatia, the Czech Republic, Germany, Hungary, Serbia, Slovakia, Slovenia and Sweden.

XXXLutz is the world’s second-largest furniture chain, with 18,500 employees.

It is also present in Hungary, via Möbelix (disocunt) stores in Budapest’s 9th district, Miskolc and Dunakeszi.