Turkey: discounters lead in growth, Migros in profitability

Date : 21 March 2019

BIM, A101 and Sok were the fastest growing leading Turkish retailers in 2018. The discounters were able to grow dynamically in a high inflation economy, at a rate of between 10% and 25%. Whereas, multi-channel retailer, Migros has improved its profitability.

BIM, A101 and Sok lead growth because they are in the best position to offset inflation

The three retailers have a high share of their sales coming from private labels. To support their Every Day Low Price (EDLP) strategy they have stricter price negotiations with suppliers. This, along with their leading market position, gives them leverage to keep prices competitively low, without forgoing profitability.

BIM met 2018 target and will invest 50% more capital in 2019

BIM met its target guidance for 2018 with 598 net store openings, and over 29% growth in sales. It has announced it will increase its capital expenditure in 2019 by 50%, to reach over TRY1,400m (US$ 257m). Around two-thirds of the investment going toward new warehouses and the opening of 700 stores in Turkey.

A101 grew by 41%, out-performing its target of 25%

A101 is the fastest growing leading retailer in sales terms, vastly outperforming its target for 2018. Much of the growth is derived from 1,000 net store openings, matching Sok’s store growth figure. A101 plans to open 500 more stores in 2019, which is slower than the previous two years expects to grow sales by over 25%.

Sok’s growth boosted by new Sok Mini format

Sok is the fastest growing leading retailer in 2018 in store numbers. This is due to three factors, its new small format banner Sok Mini, its stronger fresh food offer and ranging. Following the acquisition of around 500 UCZ Magazacilik stores in December 2017, it has converted 256 into Sok Minis in 2018. This is over 20% of the 1,264 net store openings that year. Also, it differentiates its offer when compared to BIM and A101 with a strong and quality fresh food range.

Migros remains the most profitable leading Turkish retailer

The retailer grew at a rate slower than the top three discounters, but remains more profitable. Its profit margin rose from 5.7% to 6.5%. It will continue to boost its profitability in 2019 as it aims to focus on space optimisation of large stores and reduce its debt by divesting its non-core assets. It will also invest in growth areas such as online, as illustrated by the launch of its pilot on-demand delivery service, Migros Hemen, in a part of Istanbul.

Source: Migros Ticaret A.S.

Carrefour’s sales grow, but struggles with profitability

The retailer closed nine of its unprofitable stores and sold 20 to Migros to boost its profit margins. It managed to improve its profit margin before tax from a 7.7% decline in 2017 to a 0.5% increase in 2018. In 2019 the retailer will focus on reducing rental costs and optimising its least profitable stores.

Bizim improves sales and profit significantly

The retailer increased sales growth from 3.7% in 2017 to 28.6% in 2018, and profit margin from 1.4% to 4%, its highest in over seven years. Much of the sales increase was derived from the wholesale Cash & Carry format, which saw a rise in customer numbers of 37.2%. Its new compact format, which gives it the flexibility to open stores in more locations and closer to densely populated areas. Thus, bringing the stores closer to the shopper. Also, it invested in a fresh food range to attract traffic from individual shoppers.

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