Cencosud Q1: profits grow but Brazil and Colombia remain challenging

Date : 07 June 2018

Chilean-based retailer Cencosud reported a challenging start to 2018 with mixed overall results heavily impacted by currency fluctuations. Adjusted EBITDA grew by 7.0%, while at a group level sales in Chilean Pesos declined by 4.0%.

The sales dip in supermarkets was -5.7%, though this contrasted with performance as measured local currency performance, up 5%. The key drivers of stronger profitability were financial services and DIY.

Argentina and Chile the strongest performers in supermarkets

Performance was driven by success in Argentina, Chile and Peru, with Brazil and Colombia continuing to see negative results as in 2017.

Same store sales in Argentina were +20.3%. Inflation, at 20%, was a key influence, though Cencosud also called out increased non-food sales and a positive performance in imported products. The retailer also highlighted efficiency improvements, alongside stronger competition from the traditional sector.

Same store sales in Chile were +5.1%. The positive performance was due to higher promotional activity.

In Peru same store sales were also ahead, +1.5%. This was driven by higher Metro sales and store remodelling.

While Brazil and Colombia continue to face challenges

Same store sales in Brazil were -0.7%. This decrease was caused by closing 11 stores and food deflation. The challenging macro-economic environment persists in Brazil, with shoppers experiencing reduced spending power. Cencosud feels this is impacting particularly strongly within the regions in which it operates, in the North East and the states of Rio de Janeiro and Minas Gerais.

Same store sales in Colombia were -3.1%. This reflects the closures of 3 stores. despite this being a negative performance, it is the best that has been seen in the previous four quarters. Therefore showing positive signs of future improvement.

A strengthening omnichannel focus

Cencosud is investing heavily in developing its omnichannel proposition to generate better performance in the future.

• For Chile this has included introducing 90-minute deliveries and using robots in store

• In Argentina drive-thru has been implemented at 15 stores

• For Peru click and collect stores have increased to 12, and drive-thru to four

• In Colombia there is now nationwide coverage of non-food e-commerce orders. It is also working with app based Mercadoni, as a third party delivery solution.

The changes implemented have so far delivered an increase of revenue of 44.2%. This is a penetration of 2.4%, compared to 1.6% in 1Q17.

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