Jerónimo Martins: 2016 investment plans

Date : 07 March 2016

Following on from the announcement of its 2015 full year results, Portugal-based Jerónimo Martins has set out its investment plans for the year ahead and how it is aiming to win in its home market, Poland and Colombia.

Investment to be lower in 2016 than in recent years

Despite the uncertainty of how the retail tax is set to be implemented in Poland, the continuing competitive nature of its home market and on-going high levels of promotions in both, Jerónimo Martins has said it is planning to invest between €550m and €600m in 2016 to expand its presence in all the countries it operates in. The figures are slightly lower than in recent years and underline a slowing the pace of expansion in Poland as it focuses more on the optimisation of its assortment.

By country, Jerónimo Martins said:

Poland

Jerónimo Martins will invest ‘about 45%’ of the total figure, with a plan to add around 100 new stores in 2016, but with some of these potentially replacing existing sites, which could lead to the closer of 20 existing ones as occurred in 2015. Biedronka ended the 2015 financial year with 2,667 stores and as part of its 2016 investment discussion Jerónimo Martins said it still saw the scope for it to operate between 4,000 to 5,000 Biedronka stores in Poland in the medium to long term, excluding the potential for the convenience store concept it is testing.

The retailer said it is being even more selective in its expansion plans in the country and that 2016 would see more focus placed on optimising its existing operations rather than driving sales through store growth. As part of this, the retailer said it had seen a positive impact from the changes it had made to its assortment in 2015 and was expecting these to help underpin volume growth in 2016.

Portugal

Jerónimo Martins said it would invest €100m in its home market to open new stores, remodel existing sites, expand the trial of its Pingo Doce & GO! format and in its supply chain. About half the figure will be invested in a new warehouse in Valongo, near Porto, to aid its growth in the area. Jerónimo Martins said it will also be investigating opportunities to acquire another site near Lisbon, where it aims to build another warehouse, albeit not in 2016, which will be aimed at helping it to lower out of stocks, transport cost and minimise inventory levels where possible.

In relation to the trial of its Pingo Doce & GO! format, Jerónimo Martins said it was pleased with the initial results from its two stores and that it was aiming to open five more stores on BP forecourts. However, despite speculation to the contrary, the retailer ruled out the possibility of it adding an e-commerce solution in 2016 due to a lack of clarity on how to make money from the channel given Pingo Doce’s food focused offer.

Colombia

Jerónimo Martins’s most recent market addition, Colombia, is set to receive around €100m in investment, twice as much as was attributed to it in 2015, when it opened 56 new stores. The retailer said it did not rule out making tactical acquisitions in the country in the medium term, but notwithstanding this was aiming to open between 70 to 100 stores in 2016 to add to the 142 it operated at the end of 2015. It expansion in the country will see it enter a third region and add new stores around the country’s capital Bogota, after previously entering the Coffee Growing region and the Caribbean Coast area.