Netherlands-based Jumbo has announced its results for 2016, saying total sales rose 7% to €6.678 bn (or 9% stripping out the beneficial effects of a 53rd week in 2015). The retailer said organic growth of 4%, versus its estimate of industry wide growth of 2.5%, meant it gained share and underpinned its sales performance during the year.
Organic growth driving performance
Jumbo said that the results underlined the successful implementation of its strategy during 2016. Jumbo’s CFO, Ton van Veen, in an interview in Levensmiddelenkrant said that 2016 marked a year in which it was able to focus on its existing stores, rather than having to concentrate on the integration of acquisitions.
Van Veen said that the organic growth at existing stores was driven by a combination of both current shoppers spending more with it and its ability to attract new ones. He highlighted the benefits of the retailer’s annual and seasonal offers programme, which it launched in 2016.
The retailer pointed to the remodelling of about 60 stores, with some extended to allow them to carry a wider range, the underlining of its EDLP message, expansion, through the addition of more pick-up points, and extension, through the launch of home delivery, of its online offer and the acquisition of La Place restaurant chain. The sale of non-core assets towards the end of 2016 has created a more streamlined company, which it said places it in a better position to continue to roll out its strategy in 2017.
Online and La Place playing a bigger role
Jumbo said online was a key growth driver for the company during 2016. Van Veen said that online accounted for between 1.5% to 2% of total sales (€100m to €134m) at the end of the year, with the retailer targeting a longer-term figure of about 5%. To support this growth in the medium to long term, the company said that it had expanded the capacity of its ecommerce-focused fulfilment centre to meet the demand of 50,000 orders per week, up from 20,000 previously.
Jumbo said that La Place saw sales rise 12% to €103m, enjoying organic growth of 5%. During the year eight new La Place restaurants were opened.
Looking ahead to 2017
Following on from the results, Jumbo’s chief executive, Frits van Eerd, said: “ The figures for 2016 show that we are well on track. We want to grow further and with that goal in mind we have been making over the past year aimed at even more agile and more customer-oriented organization of the Jumbo..”
The most eye-catching element of the results announcement was the potential for Jumbo to launch smaller, convenience stores in urban areas in the Netherlands during 2017. The retailer said that the stores would blend elements of both the existing Jumbo and La Place offers. Discussing the initiative, van Eerd said: “ This move fits perfectly with our omni-channel strategy. This allows us to better show what Jumbo stands for: We want healthy, tasty and easy to make food accessible to everyone.”
In an interview in Het Financieele Dagblad after the results, van Veen, said that it will begin testing the concept in about five stores in 2017, with the first to be opened at the end of Q1 or early Q2. Van Veen said that Jumbo was not planning to mirror the offer already available to shoppers in the Netherlands at Albert Heijn and Coop and, instead, it would be looking to upweight its fresh food and prepared food offer. Finally, he noted that in the longer term Jumbo convenience stores could be opened in more city centres and at railway stations.
Elsewhere, the company said that it wanted to open about 15 new Jumbo stores and one FoodMarkt.
A key element in 2017’s growth strategy will be to grow online. Jumbo has said it wants to double the number of stores that offer home delivery during the year, from the ‘more than 100 locations’ that offer the service at the end of 2016. The delivery option will support the expansion of the retailer’s pick-up point offer, which Jumbo said would be extended to its 300th site in January. Van Veen pointed to the opportunity provided by B2B sales, which the retailer had not had the opportunity to fully exploit due to insufficient capacity at its distribution centre.
3. La Place
Following a successful 2016, Jumbo will expand La Place restaurants. Expansion will be aided by an exclusive partnership with the department store chain Hudson's Bay, which will see La Place restaurants added in-store at the former’s sites in the Netherlands. Meanwhile, La Place will grow its presence on the Netherlands’ motorways as part of the previously announced plan for it to acquire 18 AC Restaurants sites, which will be converted to La Place over time. The chain will also expand internationally, with restaurants to be opened in Paris, Toronto and Zurich.
4. Supply chain
To support the chain’s expansion and underpin its efficiency, Jumbo has said that towards the end of 2017 it would begin the construction of a new 43,000 sq. m distribution centre in Nieuwegein. The nationwide, automated distribution centre, which is set to be completed in 2020, will be focused on medium and slow moving items.