Migros is rapidly divesting unprofitable operations, transforming former Melectronics stores into Media-Markt branches and planning a switch from SportX to Ochsner Sport. Questions remain about the future of Micasa, Do it + Garden, and Hotelplan. The struggling German chain Tegut faces significant losses, prompting Migros Zurich to consider restructuring or selling it. The increasing need for resources and focus on domestic competition complicates decisions, raising doubts about Tegut’s alignment with Migros’ overall strategy.
Migros deserves recognition for its commitment to its business plans. The previous Melectronics stores are now being transformed into branches of Media Markt, and SportX will transition to Ochsner Sport locations next year. Additionally, the logo of Thömus, a bike company based in Bern, will soon be featured at the Bikeworld specialist stores.
By Christmas, crucial decisions are expected regarding the futures of Micasa, Do it + Garden stores, and the travel subsidiary Hotelplan. A decision regarding the industrial subsidiary Mibelle is anticipated by early 2025.
The company is actively divesting from its unprofitable sectors. However, one persistent challenge remains: Tegut, the German supermarket chain acquired by Migros Regional Cooperative Zurich in 2012. Tegut has faced significant losses for several years and is reportedly still in the red in 2024.
Despite these issues, Migros Zurich reaffirmed in the spring that it is committed to its German venture and is not considering selling Tegut. However, recent reports from the German newspaper “Lebensmittelzeitung” indicate that they have engaged an external consultant to evaluate assistance for Tegut.
A high-ranking source within Migros now suggests that the Zurich cooperative will soon confront a pivotal decision: should it sell Tegut or initiate a restructuring plan?
Challenges Ahead
This presents Migros Zurich with a difficult choice: divesting Tegut would mean significant financial write-offs. Given its current state, the sale would yield minimal returns, primarily from a few locations in affluent neighborhoods like Munich. Since 2012, Tegut has only recorded profitability in four fiscal years.
On the other hand, restructuring Tegut would incur substantial costs as a complete overhaul would be necessary. The supermarket chain struggles to compete in the German market dominated by giants like Lidl, Aldi, Edeka, and Rewe, with Tegut’s net revenue of approximately 1.3 billion placing it at a disadvantage.
To differentiate itself, Tegut aims to position itself as a higher-quality, sustainable alternative. Unfortunately, this strategy hasn’t resonated well with cost-conscious consumers, who often find Tegut’s prices higher than competitors. Moreover, Tegut does not fit the profile of a dedicated organic retailer but functions more like a conventional supermarket, making it difficult to find a unique position in the market.
Migros Zurich appears determined to improve Tegut’s prospects, as indicated by their announcement of a turnaround project aimed at enhancing profitability and securing its future. They emphasize that their focus remains firmly on restructuring Tegut.
Though the Zurich Regional Cooperative is a legally separate entity able to make independent decisions, many in the central Migros management would prefer an end to the difficult situation rather than prolonging the struggle with Tegut.
The broader Migros organization took significant write-downs in 2023 to eliminate legacy challenges and is preparing for additional write-downs in 2024. If all goes as planned, Migros hopes to overcome its most substantial hurdles by its anniversary year in 2025.
If Migros Zurich retains Tegut, it could miss out on this opportunity for recovery. The turnaround for Tegut is slated for three years, and only time will reveal whether this is sufficient.
Reassessing International Ventures
Tegut also exhausts financial and managerial resources from Zurich, diverting attention from domestic competition. Migros acknowledges that it has lost market share in Switzerland to competitors. The company’s leadership is therefore advocating for a concentrated focus on the domestic market against rivals like Coop, Aldi, and Lidl.
This raises questions about Tegut’s alignment with Migros’ current strategy. The new management under FMCG Director Mario Irminger is skeptical about foreign investments, stressing that international engagements should yield clear benefits for Swiss consumers.
But what tangible advantages does a loss-making supermarket chain across the border provide to the average Swiss Migros shopper? Migros Zurich points to the development of Teo, a modern supermarket concept with a limited selection of about 900 products, which operates without staff and features extended hours. Currently, five of these stores are functioning mainly in the Zurich area and eastern Switzerland.
The future of this model remains uncertain, and while unattended stores can complement the existing network, a widespread rollout is not in sight.
Given these challenges, the leadership of Migros Zurich, under Patrik Pörtig since this summer, must carefully evaluate whether to continue with Tegut. This wouldn’t mark the first exit from the German market, as they previously withdrew from the fitness sector after incurring substantial losses during the pandemic, estimated at around 150 million francs.
Nonetheless, divesting from Tegut