RetailAnalysis
08 March 2017
Currency effects hit Cencosud results

As Cencosud releases trading figures for Q4 2016 that show a slowdown from 2015, we look at performance in its supermarket division across its five Latin American markets.

Overall group in Q4: Local level growth offset by currency shifts

Chilean retailer Cencosud's fourth quarter revenues fell by 6.5% compared to Q4 2015. While they increased 7.0% at constant exchange rates, there were some sharp contrasts in performance by market, alongside the significant impact in currency fluctuations on these results. 

Currency depreciation also affects FY group results

Cencosud also reported a 6.0% fall in consolidated revenues for 2016, compared to 2015. It explained this was due to currency depreciation against the Chilean Peso (CLP). At constant exchange rates, revenues were up 7.9%.

Sales improvement at Chilean supermarkets  

Same store sales were up at Chilean supermarkets in Q4. Sales improved in particular at Santa Isabel but also at Jumbo, with same store sales across its Chilean supermarkets of 3.8%. Sales growth was supported by stronger promotional activity, and as a result EBITDA dropped over the year, reducing EBITDA margin from 11.5% in Q4 2015 to 10.2% in Q4 2016. 

Struggles in Argentina

Supermarkets' same store sales in local currency were up 18.5% compared to Q4 2015. However, this was a disappointing performance: inflation was actually ahead of this. And, devaluation of the Argentine peso vs its Chilean counterpart meant that in Chilean pesos, turnover from Argentinean supermarkets dipped 28.0% in the quarter. Profitability was hit hard, as rising input costs impacted.  

Brazil: local level challenges continue

The market in Brazil is also struggling. Retail sales volume declined 6.4% year-on-year in November 2016, according to IBGE figures. By contrast with other markets, the Brazilian real strengthened against the Chilean peso: the positive group figure masked a decline in same store sales in local currency of 6.5%. An improved performance in food at Gbarbosa, and better assortments, were positives, though even with the Q4 rise of 4.3% in CLP, year-on-year sales in CLP were still down 5.3% over 2016.      

Peru struggles while Colombia improves 

In Peru, supermarket revenues were down 9.8% in Q4 in CLP, with the decline mostly due to currency shifts. However, local currency same store sales were down 3.5%. In Colombia, supermarket revenues were up 4.7% for Q4 in local currency, though at group level this was masked by currency shifts. Same store sales increased 3.3% and two stores opened.  

Retains a positive outlook for 2017

Cencosud seems confident about the outlook for the remainder of this year. It says markets are healthy in Chile and Colombia, while it sees improved economic conditions in Peru, Argentina and Brazil.

We've looked at how Cencosud aims to grow in 2017. Find out more here.

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