Halfway through the financial year, Belgian market leader Colruyt Group is doing well: its comparable turnover, its gross margin and its market share are on the up. However, profit did fall as a result of one-off events.
Retail performs well
The retailer announced results for the first half of the 2019-2020 financial year that were better than expected. Turnover increased by 2.8 % to 4.7 billion euros, but it was boosted by the change in the financial year of the French companies and by the integration of bicycle retailer Fiets! On a comparable basis, revenue growth was 2.1 %, including fuel (or 1.9 % excluding fuel). Moreover, a positive calendar effect gave Colruyt another 1.3 % bonus. Gross margin increased to 26.6 % of sales, partly as a result of operational improvements, says the retailer. Nevertheless, profit went down 5.7 %, as a result of one-off factors such as the sale of a participation in an offshore wind farm in the previous financial year.
The retail division performed well, with turnover rising by 2.6 % to 3.9 billion euros. On a comparable basis, growth was at 2.0 %. Colruyt sold 1.4 % more in Belgium and Luxembourg, predominantly as a result of a positive calendar effect (Easter). OKay, Bio-Planet and Cru achieved a joint revenue growth of 3.0 %. Turnover for the wholesale division—which also includes the Spar Colruyt Group, Alvo and Mini Market stores—rose by 0.9 % to 414 million euros. On a comparable basis, sales did remain virtually stable. Despite a "challenging macro-economic climate, strong competition, and varying promotional pressure", the market share of Colruyt Laagste Prijzen, OKay and Spar in Belgium increased from 32.4 % to more than 32.5 %.
Non-food retail sales increased by 14.4 %. Dreamland and Dreambaby experienced growth of 5.2 %, mainly as a result of a positive calendar effect. There was also growth for the online second-hand platform NewStory, with seven new collection points. In France, comparable sales increased by 7.1 %, excluding fuel.
Unchanging price strategy
Colruyt is continuing to invest in e-commerce: the home delivery trial taking place in six municipalities near Brussels is a success and will be extended by six months. The retailer is also emphasising that the arrival of new players on the market (as in: Jumbo) has not altered anything in their pricing strategy: with more than 100,000 price levels at competitors registered per day, price reductions and promotions of competitors are daily reflected in the sales prices. The implementation of electronic price labels is proceeding according to plan and will be completed by the end of 2019.
Colruyt Group expects the retail market to remain challenging and does not foresee a significant resumption of the economic climate for consumers in Belgium over the short term. The consolidated net result for the 2019/20 financial year is expected to be slightly higher than that of the previous financial year (372 million excluding non-recurring securities).