Auchan to focus on profits after ‘below par’ FY2018 results

Date : 11 March 2019

France-based Auchan said in its Retail division, revenue had fallen by 3.3% at current exchange rates (0.5% at constant exchange rates) to €50.3bn. It said on a like-for-like basis revenue fell by 2.4%. Revenue dropped in every region in which Auchan operates.

France: revenue fell 1.3%

Auchan said in FY2018, revenue fell 1.3% in its home market. It said it was affected strongly by the ‘yellow vest’ protests at the end of the year. It estimated that the protests had negatively impacted its revenue by €140m and its EBITDA by €35m.

On the positive side, the company said its 125 days promotion had been a success, until the demonstrations started, and had led to a 4.5% rise in revenue at its launch in October. During the year Auchan completed the conversion of Simply Market stores to Auchan Supermarché. Finally, it noted that by the end of 2018 it had 100 responsible sourcing channels in place.

Southern Europe sees ‘mixed results’

Across its three country operations in southern Europe revenue decreased by 0.7%. Auchan said it had enjoyed ‘solid results’ in Portugal and Spain but suffered ‘a marked decline in momentum in Italy amid sluggish consumption and more intense competition’. In an attempt to stem its losses in Italy Auchan said it had closed 23 stores in the country during 2018, including two hypermarkets.

Russia drags down results in Central and Eastern Europe

In Central and Eastern Europe, Auchan reported revenue fell by 1.4% at constant exchange rates. While Hungary, Poland, Romania and Ukraine had all shown growth, revenue in Russia contracted. Auchan closed 11 stores in Russia in an attempt to turnaround its performance, which it did simultaneously with the introduction of its new business model in the country.

Revenue falls 2.6% in Asia

At constant exchange rates Auchan said revenue had fallen by 2.6% during 2018. It said the drop was ‘mainly as a result of the concession agreement with Suning regarding the sale of home electronics and appliances in stores [which meant] the revenue derived from these sales is no longer taken to Sun Art Retail’s accounts’.

On the positive side, it noted the alliance with Alibaba had led to notable changes, such as the digitisation of 484 Sun Art stores ahead of schedule. For more on Sun Art’s results, see our news story here. Meanwhile, for coverage of the change in management at the company following the results, see our store here.

Performance leads to implementation of ‘Renaissance’ action plan

While the company confirmed its commitment to its long-term Vision 2025 strategy, it said it was ‘to adopt a simpler approach and centre its efforts on turning profits around’. This new initiative would focus on two key areas:

  • In the short term: it would look closely at where the retailer is losing money and take whatever steps are necessary to stem the losses. Italy and Vietnam were identified as countries where it is ‘durably loss-making’, while it was aiming to close 30 stores in Russia and three in China in 2019. However, France seemed to escape some of the focus, with staffing levels and hypermarkets to remain untouched. Investment would be scaled back in 2019
  • In the medium term: this will lead it to improve its food offer, work in support of local areas, become more customer-centric and build out an innovative ecosystem with its partners