Spain-based discounter DIA has highlighted the positive developments it has taken in the first six months of its financial year. At the same time the retailer said gross sales under banner had fallen by 18.3%, or by 6.9% at constant exchange rates, to €4.25 bn.
Disruption affected overall performance
DIA reported that like-for-like sales dropped by 7.8% in the half, versus 3.6% in H1 2018, due to a continuing ‘negative trend and the sharp deterioration during the period caused by the out-of-stock levels in our warehouses and stores resulting from the business disruption’.
The retailer went on to say that its negative performance in H1 was also driven by:
- Out-of-stock levels throughout its business brought about by ‘sharp risk-cutting decisions made by trade insurance companies…, [which] resulted in a level of supplier tightening that impacted negatively the supply chain, resulting in a substantial increase in the out-of-stock levels in our warehouses and stores…’
- Closure of poorly-performing stores: DIA closed 653 stores in H1, mainly in Brazil and Spain
- A de-franchising programme: which led to it taking back ownership of 222 stores, mainly in Brazil and Spain. The initiative was ‘aimed at improving the quality of [the] franchisee network’
- Range optimisation process: which DIA said led to a ‘meaningful’ reduction in SKUs, greater simplification and productivity improvement
As a result of the disruption, DIA reported:
- DIA Group gross sales under banner fell 6.9%, at constant exchange rates to €4.25 bn, with like-for-like sales dropping by 7.8%
- Spain: gross sales under banner fell 7.0% to €2.5 bn, with like-for-like sales dropping by 6.8%
- Portugal: gross sales under banner fell 4.6%, to €377.1m, with like-for-like sales dropping by 3.9%
- Argentina: gross sales under banner fell 4.9%, at constant exchange rates, to €691.1m, with like-for-like sales dropping by 9.6%
- Brazil: gross sales under banner fell 10.9%, at constant exchange rates, to €681.1m, with like-for-like sales dropping by 9.7%
At a store number level, DIA said at the end of H1 2019 it operated 6,809 stores, 629 less than at the end of H1 2018. During H1 2019 it said it closed 663 stores and opened 34. By country it closed 315 (net of openings) in Spain, 11 in Portugal, 29 in Argentina and 274 in Brazil.
DIA looks forward to H2
The retailer said the initiatives it had put in place in H1 2019 had helped it ‘normalise the relationship with credit insurers and all the supplier base’. This had already had a positive effect, with it noting that like-for-like sales had shown a ‘gradual recovery from June all-time low levels’. In the short term DIA said it will be looking to build on these foundations ‘to drive incremental traffic and sales in [its] stores and improve productivity’.