Spain-based DIA has reported its 2018 results, with gross sales under banner falling by 14.9% - a contraction of 0.9% in constant currency terms – to €9.39bn. The retailer reported that group like-for-like sales fell by 3.6% in 2018, adjusted by inflation in Argentina, versus a contraction of 4.9% in 2017. At the end of 2018, DIA operated a total of 6,157 stores with 336 store openings and 280 closures.

Adjusted EBITDA fell 35% to €337.9m due to the discontinuation of Clarel in Spain and Portugal. Meanwhile, net debt increased by €506m to €1.45bn.

Spain: -2.4% to €5.2bn

In Spain DIA’s gross sales under banner decreased by 2.4% to €5.15bn, while like-for-like sales fell by 2.3%. The retailer attributes this to “the negative 2.3% comparable sales and almost stable performance of average space during the period”. It said that both La Plaza and Dia&Go stores had increased sales, but all other stores declined in volume terms. However, online gross sales under banner increased by 37.4% to €76.7m representing 1.5% of total gross sales in Spain.

Portugal: -3.1% to €808m

In Portugal, gross sales under banner also decreased, by 3.1% to €808.4m. This was driven by the closure of 27 stores and a contraction in like-for-like sales, by 5%. Adjusted EBITDA fell by 28.7% to €30.1m.

Argentina: -38.8% to €1.8bn

DIA’s business in Argentina was the worst performing segment with gross sales under banner falling by 38.8% to €1.79bn. However, excluding the effects of currency changes, they rose by 3.0%. The retailer pointed to the ‘challenging macroeconomic environment and the strong decline in private consumption’. Like-for-like sales fell by 2.8% in volume and value terms, which DIA said saw it outperform the market as it ‘continued to increase [its] market share’.

Brazil: -18.1% to €1.4bn

In Brazil, gross sales under banner fell by 17.9% to €1.64bn, although in local currency terms they were down only 1.8%. DIA attributed the contraction to “several exceptional external and internal factors that are unlikely to be seen in the years ahead”, such as the truck transport strike. Like-for-like sales in Brazil declined by 8.1%, which DIA said was ‘poor’.

CEO: 2018 was “a turbulent year for DIA”

Commenting on the results, CEO Borja de la Cierva said, “2018 was a turbulent year for DIA, probably the most difficult since the company's foundation more than forty years ago. The restated figures and in particular results for 2018 are a clear indicator that our performance did not meet expectations”.

Spain-based discounter DIA has received a takeover bid from investment group Letterone (L1 Retail), which is controlled by Russia-based Mikhail Fridman. Fridman established the X5 Retail Group, before growing it into the leading grocery retailer in the country.

As part of the takeover bid, L1 also announced ‘a comprehensive rescue plan’, which included a six-pillar transformation plan.

Transformation plan to take five years

L1 said it would commit €500m to a capital increase at DIA, which will put it on a firmer footing from which to build. The company admitted that turning around DIA will ‘not be… easy’ and will take five years. L1 said it believes that through its investment and turnaround programme it can ‘re-emerge as a leading player in food retail in Spain, Brazil, Argentina and Portugal’.

Turnaround built on six pillars

L1 said it would focus on what it sees as six key areas:

1. Recruit new leadership and talent: using internal and external candidates, L1 would look to ‘attract and develop talent with modern retail expertise and secure uncompromising leadership attitude’;

2. Real estate strategy: this would focus on improving sales densities and traffic through ‘active management of store locations and formats’ to ultimately ‘maximise EBITDA profitability through investment’ in its stores;

3. New commercial value proposition: the pillar probably most aligned with DIA’s existing aims, if not executed effectively in recent years. This area would see it focus on providing freshness, quality and value for money, with this supported by the development of a ‘ best-in-class private label offering’. These initiatives would be supported by building ‘new and collaborative relationships with suppliers to create long-term partnerships’;

4. Reset pricing and promotions: price investment will be key to improve its price perception with shoppers, while promotions will be used to drive traffic;

5. Retail operations execution: again focused on developing DIA’s talent, albeit with an aim to identify ‘high-performing franchisees and partners for a new and improved long-term franchisee model;

6. Investment in brand and marketing: to revamp the DIA brand and uses its new and updated stores to act as the foundations ‘for the new DIA branding statement’;

Plan to provide foundations for growth

Commenting on the takeover bid, L1 Retail’s Managing Partner, Stephan DuCharme, said: “DIA is facing an uncertain future. This rescue plan not only addresses DIA’s capital structure requirements but provides a base for DIA to re-emerge as a champion of Spanish food retail. L1 Retail is fully committed to the Spanish market and [the] rescue plan secures a long-term future for all stakeholders including customers, employees, franchisees, suppliers and lenders. Jointly we can achieve this turnaround, which will require leadership, hard work, expertise, commitment and patience.”

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Aldi Nord and South’s strategy continues to evolve as they announced, for the first time, discount offers on permanently listed brands.

Expand offers to the permanent range

In Germany, Aldi Nord and Sud will be offering reduced prices on branded products from their permanent ranges. Aldi used to limit these offers to temporary listed products or brands, as seen last year.  The first offer starts next week with Kerrygold butter and 20% off on a 1.25L bottle of Coca Cola. The promotion will be an ongoing activity with new brands from the permanent range spotlighted every week.

Source: Aldi Nord

Closer relationship

This is the latest example of the two retailers working closer together. Earlier this year, they announced their common engagement and campaign to promote healthier nutrition. In 2018, some private labels were harmonised between the two companies. This standardisation is expected to continue and could lead to potential change in terms of supply chain.

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