Schwarz Group has reported a strong sales grow of 7.4% to EUR96.9 bn in the financial year 2017/2018 driven by the performance of Lidl. Lidl’s revenue grew by 8.8% to EUR74.6 bn, while Kaufland’s sales grew by 3.0% to EUR22.3 bn.
The Group has continued its steady store opening plan with 276 new outlets and closed the year with 11,730 stores. In Germany, Lidl operated 3,200 stores and Kaufland 660 stores. Lidl entered the USA where it operated 50 stores by the end of its 2017/2018 financial year (end of February 2018).
Schwarz Group invested EUR7 bn in the 2017/2018 financial year. The Group reported cost savings thanks to synergies within the group in the procurement of software and cars.
Kaufland and Lidl challenged in Germany
Lidl’s sales growth in Germany slowed slightly to 5.2%, due to the increasing competition from Aldi Süd and Aldi Nord. Both competitors started to remodel their stores and listed more branded products, leading to an increase in sales. However, Lidl reacted to this by running stronger promotions and increasing its permanently listed assortment to 2,300 SKU's, which helped it to sustain steady growth.
Kaufland’s sales growth in Germany increased marginally year on year, +0.9% to EUR13.7 bn in comparison to 0.6% growth in 2016/2017. It has reported a profit loss for this financial year which was partly caused by its investment in store remodelling. The retailer remodelled more than 50% of its stores. Despite the overall loss, Kaufland has revealed that the financial results in the second half of the year were better than planned.
Lidl thriving in Austria, Spain, Czech Republic and Sweden
Lidl’s best performing markets in terms of net revenue growth remained Austria (+8.3% to EUR1.3 bn), Spain (+7.8% to EUR3.6 bn) and Czech Republic (+14.0% to EUR1.7 bn). Strong performance was also achieved in Sweden (+11.2% to EUR1 bn) and the market will remain a key focus for Lidl. It has plans for a further 24 store openings in the market over the next couple of years.
According to our DataCentre, Lidl’s fastest growing market was the UK. We estimate that Lidl’s sales grew by +16% to GBP6.1 bn (EUR7 bn), with 50 store openings in 2017/2018.
Slower progress in USA
In the USA, Lidl opened 50 stores, less than initially planned. The store concept (size as well as assortment) is still being adapted to the US shopper. While new stores will have a smaller sales area of around 1,900 sq m (initially up to 3,300 sq m), Lidl has recently started to promote over 300 branded products in a marketing campaign.
Kaufland grew in Romania, but underperformed in the Czech Republic
In Romania, the revenue grew by 4% to RON10.1 billion (EUR2.2 billion) although it opened only five stores. Its expansion will accelerate this year as it plans 10 new store openings. We forecast that Romania will become Kaufland’s second largest market in 2018.
Kaufland’s revenue declined by 2% to CZK57 bn (EUR2.2 bn) in the Czech Republic, partly due to the changes in assortment planning.
For insight to Lidl's and Kaufland's performace on the country level contact [email protected]. We forecasted Schwarz Group's 2017/2018 revenue with the accuracy of 99.7%.
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Miloš Ryba, Head of Retail Strategic Projects: Miloš has been analysing global retailers and emerging markets for more than a decade. He leads IGD’s global discount retail team, and his deep expertise lies in understanding the strategic direction of discount retailers right across Europe. Miloš holds a Master’s Degree in Finance and Management from the Mendel University in Brno, Czech Republic, and has also studied at the University of Mannheim in Germany.
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