Innovative formats and omnichannel growth underpin Grupo Éxito’s solid Q1 performance

Date : 14 May 2020

Oliver Butterworth

Retail Analyst

Grupo Éxito (part of French retail group Casino) has reported net sales of COP2.9 tn (US$744m) for Q1. This represents sales growth of 9.4%, or 5.3% ex-COVID-19. Same-store sales (SSS) grew by 9.6% in the quarter.

Grupo Éxito has seen positive sales growth over the last 18 months, which has been largely driven by the solid performance of its latest store formats, as well as omnichannel growth. Innovation and omnichannel represent 51% of Éxito’s sales growth in Q1 (ex-COVID-19). This which was further supported by a 12.8% increase in food sales.

Source: Grupo Éxito

 

Solid performance of Éxito WOW and Carulla FreshMarket…

Éxito WOW and Carulla FreshMarket are Grupo Éxito’s latest store concepts. They are remodels of existing stores and fall in the Éxito and Carulla banners, rather than sub-banners. Both WOW and FreshMarket stores have seen significant sales growth uplifts post-conversion.

Éxito WOW launched in 2018 and nine stores have been converted to it. In Q1, these stores delivered a 14.6% growth in sales (vs. 7.2% in Éxito non-WOW stores).

Source: IGD Research

 

Source: IGD Research

 

Carulla FreshMarket grew sales by 24.7% (vs.13.3% for the rest of the Carulla banner). Up to Q1, 13 stores had been converted to FreshMarket.

Source: IGD Research

 

Source: IGD Research

 

...as well as Surtimayorista

Surtimayorista, Éxito’s cash and carry banner, saw a 13.3% sales increase in Q1. The business now operates 32 stores under the banner, which continues to grow. It opened 29 Surtimayorista in the last 12 months, of which two opened in Q1. These were a mix of new stores, conversions, and remodels. The banner, which serves both B2B and B2C customers, is becoming increasingly significant for the business and already represents 4% of total sales.

Source: IGD Reearch

 

Source: IGD Research

 

Strong omnichannel growth

Omnichannel sales grew 44.6% in Q1 and represented 5.2% of total sales. Ecommerce sales increased 41%. There are close to 1,100 members on its marketplace and Gross Merchandise Volume (GMV) grew by 49% in the quarter.

In Q1 Grupo Éxito fulfilled 1.2m omnichannel deliveries through a combination of its own home delivery service and its partnership with last mile deliverer Rappi. This represents 36% more deliveries than in Q1 2019 because of the coronavirus lockdown. The business relaunched its Éxito and Carulla apps a year ago and collectively they have received over 2.4m downloads.

Coronavirus influencing store and channel choice

Prior to Q1, the Éxito banner had delivered the strongest SSS growth in the last few quarters. However, in Q1 we saw a spike in SSS for the Carulla banner and its discount banners (Super Inter and Surtimax), which have overtaken Éxito.

The Éxito banner has a high proportion of hypermarkets and the stores are typically further from people’s homes. Due to restrictions put in place due to the coronavirus lockdown we are seeing more people revert to shopping at their closest store and people want to shop quickly so are choosing smaller formats where possible.  

The sales increase in discount formats could suggest Colombian consumers are becoming more apprehensive about their finances post-coronavirus, particularly as many of these stores are located in lower affluent neighbourhoods.

Source: Grupo Éxito

 

Could COVID-19 impact Grupo Éxito’s expansion plans?

Grupo Éxito previously said 85% of its Capex budget for 2020 was focused on expansion, innovation, omnichannel and digital transformation activities. Given its recent activity, we expect the business to slightly reduce the number of openings and remodels this year and invest more heavily in omnichannel and strengthening ecommerce than originally planned.