Spain-based Mercadona said it grew sales by 6% in 2018, generating €24.305bn in the year. Profits rose by 84% to €593m, which came despite the retailer investing €1.5bn in its network and operations.
Mercadona said it had invested €962m in store openings and renovations, €257m in the automation of its logistics platform, €225m in its digital transformation and €60m in its expansion into Portugal. Commenting on the results, Mercadona’s president, Juan Roig, said: “Mercadona is doing very well and this year will be even better”.
Investment in stores continues to pay off
Roig said the focus on the customer and improvements to its store estate were helping Mercadona to win. Given the success of its efficient store concept, with 400 updated during 2018, Mercadona will continue to roll out the design until 2023. During the timeframe the retailer will invest €10.0bn in its store network to improve and digitise them. In 2019 this will also see the opening of a further 60 stores, the closure of 100 more and the relocation of 400.
The investment is aimed at helping support Mercadona’s target of growing sales by 3.7% to €25.2bn in 2019. The retailer said it would invest €2.3bn in the year ahead, while its net profit was forecast to fall by 27% to €435m.
Expansion of ‘Ready to Eat’ sections
Following a successful launch and roll out, Mercadona will add its ready to eat ranges at 250 supermarkets. The range, which is made up of 35 dishes, has been rolled out to 17 stores in Valencia, Madrid and Barcelona. Mercadona has invested €5.0m in the range to date. Roig said the step was necessary as ‘the food of the 20th century will not exist in the middle of the 21st century’. The retailer is actively looking for suppliers to support the range’s expansion as it does not have the scale to meet expected demand.
While online investment will be sustained
Following investment in the channel, Mercadona said it generated a monthly turnover of €2.2m online, an increase of 120%. Despite the growth in sales, Roig admitted the retailer ‘does not make a profit [from the channel]’.
The service, which is available in 134 postal codes in the province of Valencia, has seen the volume of orders double since its launch and expansion. Roig said in 2019 The retailer will launch a new model for grocery ecommerce in Barcelona, while this will be added in Madrid at the end of the year or in early 2020. After that the system will be extended to Zaragoza, Alicante, La Coruña, Bilbao, Murcia, Seville, Las Palmas and Palma de Mallorca.
Regional expansion is next on the list
Starting in 2019, Mercadona will begin to expand outside Spain. The first of 10 stores will be opened in Portugal, in Porto initially, and expanded to Lisbon later. Mercadona has already acquired sites for a further 10 stores and is aiming to operate around 150 in the next seven or eight years.
Without giving a timeframe, Roig said the retailer was interested in expanding into Italy. In both cases, Portugal and Italy, the retailer ruled out buying any local chains to quicken the pace of expansion.
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