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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Companies in Spain pledge to making food healthier, DIA makes more leadership changes, and Makro accelerates the digitalisation of the HoReCa industry in Spain.

Reducing sugar, saturated fats and salt

The minister of health, consumption and social welfare, Maria Luisa Carcedo, has signed agreements with 20 associations that represent 398 food and drinks companies to reduce the average amount of sugar, saturated fats, and salt in products by 10% by 2020. The plan covers 13 food groups including: soft drinks, ready meals and breakfast cereals. 

The strategy fits into the government’s strategy of nutrition, physical activity and prevention of obesity. Spain has one of the highest obesity rates in Europe with 37% of adults overweight and 17%. The figures are worse for children with 40% overweight and 18% obese. The agreements are a step towards preventing obesity and countering inequalities in health, with the government keen to use a collaborative approach between the public and private sector.

According to Europa Press, leading retailers and manufacturers like Mercadona, Consum, Kellog’s, Coca Cola, Pepsico and Bimbo are involved. Businesses will need to reformlate their products and make the first move to gain a competitive advantage.

Further changes to personnel at DIA

The group has created a new executive committee of seven members, headed by CEO Borja de la Cierva. With these most recent changes DIA aims to make its offer more appealing to customers, simplify processes and drive efficiencies.

Makro driving digital transformation

InfoRetail reports that Makro has driven the digital transformation of 12,000 bars and restaurants in Spain during 2018. Its initiatives fit into Metro AG’s international plan to digitalise the hospitality industry, and bring it on par with other industries like travel. To support the sector, Makro will launch a digital platform service to aid companies with their digital transformation.

The first electric lorry is tested in Spain

According to International Supermarket News Lidl and Mercadona have been chosen to test Man's heavy duty 26-ton electric truck. Germany-based Man Truck & Bus will run distribution tests in Madrid, the first location chosen outside Austria. The initiative is expected to be rolled out in 2025. The truck currently takes over four hours to charge, and it is hoped by 2025 the time will have reduced. Man Truck and Bus partnered with SPAR Austria last year and has been testing its electric truck there since September 2018. 

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