Leading Turkish retailer BIM has reported a 15.2% increase in revenue to TRY20.1bn (€5.1bn) for 2016. Turkey represents the largest share of sales, while expansion in its foreign operations resulted in 25% sales growth.
What’s driving BIM’s growth?
At almost 10% inflation reported for 2016 and real GDP growing at just over 5% it is no surprise to expect a double-digit growth rate amongst retailers in Turkey. BIM’s consolidated sales performance, as with its top competitors, was driven by a combination of inflation and new store openings, but mostly the former. BIM reported to have increased in its store numbers by almost 650 stores in 2016. Other top retailers in the country followed suit and reported double digit growth rates in revenues for the same year, e.g. Migros reported a 20% rise.
File to expand further, while Egypt and Morocco like-for-likes slump
BIM showed very positive results in the supermarket channel, operating under its banner, File. This was introduced in 2015 to penetrate urban centres and target the relatively more affluent shoppers. Investment will continue in developing its presence in the supermarket channel.
The success of the File banner will receive further investments in 2017 to increase its store numbers to 46, and accelerate growth over the 2018-2021 period. However, the number of File stores is marginal when compared to the thousands of BIM food discount stores it operates, so impact on top-line sales will be very limited.
Amid positive performance, like-for-like sales performance in Egypt and Morocco declined by 3% and 4%, respectively. This is in reflection of the declining consumer spend per capita in Egypt and the limiting location of stores, mostly in and around the three largest Moroccan cities.
At the end of 2016 BIM operated 6,222 stores in Turkey, Morocco, and Egypt, of which 6,201 are food discount stores, and 21 are supermarkets.
BIM to maintain expansion in a competitive environment
We expect BIM to maintain its double-digit sales growth rate as it maintains discount store number expansion. In 2016, BIM spent 44% of their capital expenditure - approx. TRY247mn (€62mn) on store openings and in 2017 we expect BIM to continue at this level of investment.
BIM will face challenges in 2017 as its biggest barrier will be other domestic food discount chains, especially A101 and Sok. Both competitors are applying an impressive expansion strategy. In 2016, the number of stores that A101 operates surpassed BIM, making it the largest discount operator by store number in Turkey.
From a growth strategy, key competitor Migros is using acquisition – Kipa purchase from Tesco in early 2017 – and a diverse retailing portfolio. BIM’s channel breadth is relatively narrow when compared with Migros. The latter's channel breadth allows it to effectively target city centres, less dense suburban areas and meet multiple shopper missions.
We expect BIM, A101, and Sok will rapidly grow in store numbers organically, via store openings rather than acquisitions. This would grow market share at a relatively slower rate but require less capital than an acquisition.