Inflation weighs heavily on Colruyt Group’s margins

The Belgian Colruyt Group expects that its profits will be “significantly lower” this financial year. That is a consequence of high inflation, which the retailer cannot fully pass on to customers.

Falling volumes

Colruyt will continue its long-lasting low price strategy in the current financial year, chairman and CEO Jef Colruyt said at the shareholders’ meeting Wednesday evening. However, in a competitive Belgian retail market facing falling volumes, the retailer cannot fully pass price inflation onto the customer.

Meanwhile, energy, transport and employee costs are rising. In total, the impact could reach 200 million euros. As a result, the consolidated result will drop significantly compared to the previous financial year. Cost control is a priority more than ever.

Low-price promise

While some retailers have (had) empty shelves due to conflicts with manufacturers, Colruyt is on speaking terms with all its suppliers, from the big concerns to local players and farmers, food retail director Jo Willemyns explains in business newspaper De Tijd. “This allows us to continue to deliver on our promise of lowest prices.”

It is possible that Colruyt Group will sell part of its wind energy subsidiary Parkwind. In that industry, the company expects both economies of scale and stronger competition over time. This requires higher investments that also entail greater financial risks. An investment bank will work out the options.