Auchan Retail generated revenue of €22.7 bn in the first half of its financial year, a fall of 2.4% at current exchange rates and by 0.4% at constant exchange rates. On a like-for-like basis, Auchan Retail said revenue fell by 0.8%. The retailer reported the performance of its operations in 12 countries, i.e. excluding Italy and Vietnam, and had restated them due to its concession agreement with Suning in China.
France and Russia continue to act as drag on performance…
Auchan said despite revenue growing, at constant exchange rates, in nine of its countries of operation, these were offset by falls in France and Russia. In its home market the retailer said ‘in a strong competitive environment’ comparable sales fell by 1.3%, while in total they were down by 1.7%. In Russia Auchan said revenue ‘fell sharply at constant exchange rates’.
Its performance in Asia, where revenues fell by 5.6% at constant exchange rates, was linked to ‘the subject of a concession agreement Between Sun Art Retail… and a third party… no longer [being] consolidated’.
…But strategy aiding growth elsewhere
However, there was a more positive performance in its other operations. The retailer said revenue grew by 1.1% in South Europe, driven by its operations in Portugal. Subscribers wanting to see how the retailer is implementing its phygital strategy in the country can see our store visit report for the country. It said it had performed positively in Spain and Luxembourg.
The 0.4% fall in revenues at constant exchange rates in Central and Eastern Europe was driven by its performance in Russia, which more than offset growth in other countries. Auchan highlighted its strong growth in Poland.
Despite revenue fall, gross profits remain steady
Auchan Retail said that despite the drop in revenue it had kept its gross profit steady due ‘to good management of the product mix, promotions and markdowns’. It noted its EBITDA margin for H1 2019 was 3.4%, versus 2.5% at the end of the same timeframe in 2018. However, it did stress that the margin figure for 2019 excluded the impact of its operations in Italy and Vietnam.
Retailer highlights impact of Renaissance plan
As part of the announcement, Auchan Retail highlighted the impact of its Renaissance plan, which it launched as part of its FY2018 results statement. Following this the retailer said that it had taken several steps to drive improvements across its operations:
- Action taken at store level: to improve the performance of loss-making stores it said it had taken steps to reduce costs, renegotiating rents and by ‘reducing or repurposing floor areas in store’
- Site disposals and closures: for stores that it believed had no chance of recovering their performance, Auchan has closed or disposed of 21 in France, 10 in Russia, 15 in Spain and one in Ukraine. Further store closures in Russia were flagged as a possibility
- Disposal of operations in Italy and Vietnam: since the beginning of the year Auchan has sold its stores in the two countries to local companies
- Acceleration of initiatives in China: Auchan said the performance of its stores in China had improved since the implementation of a new structure in the country. It said it had diversified its sources of revenue, ‘substantially renewed the in-store experience ‘with emphasis placed on fresh products and the catering offering’.
Long term initiatives to 2022 established
In addition to the strategies set out as part of the Renaissance plan Auchan said it was aiming to make ‘deep-seated changes to the way in which it manages its resources’. It will look to reduce its operating costs, with the ambition of realising €1.1 bn in costs savings and targeting an EBITDA margin of 6.0% by 2022.
At a product level it will look to it is aiming to double the revenue from its exclusive products, while it is looking to work with local producers, ‘based on a network of more than 4,000 regional platforms worldwide’. Finally, from a channel perspective Auchan said by 2022 it was aiming to generate 15% of its revenue outside of its hypermarkets and supermarkets.
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