Exito 1Q 2018 Net Income Rises Year-on-Year

Medellin-based multinational retail giant Grupo Exito announced May 15 that its first quarter (1Q) 2018 net profits rose year-on-year to COP$9.98 billion (US$3.5 million), up COP$17.5 billion (US$6 million) from the COP$7.6 million (US$2,600) net loss posted in 1Q 2017.

Operating income also rose 6.3% year-on-year, to COP$13.7 trillion (US$4.78 billion), the company reported.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) rose 7.2% year-on-year, to COP$693 billion (US$242 million), excluding the impact of a 4% appreciation of the Colombian peso during the period.

Among 1Q 2018 highlights: a 25% growth in wholesale sales by Exito’s “Grupo Pão de Açúcar” (GPA) division in Brazil, which includes stores under the “Assaí” brand name. Exito added 21 new stores in Brazil over the past year, boosting customer-count by 12%.

“The solid growth of 7.5% in sales in local currency in the food segment allowed GPA to assume the leadership of that business in Brazil, accompanied by a satisfactory level of profitability, with a recurring EBITDA of COP$502 billion [US$175 million] and an increase of 12.6% in Colombian pesos,” according to Exito.

“This figure is even more important if one takes into account that in Brazil, deflation of food [prices] in households during the first quarter was 4%, which directly impacts sales.”

As for the Colombian home market, retail sales are showing a “gradual” recovery from recession last year, up a tiny 0.1%, according to Exito. However, e-commerce and home-delivery sales in Colombia are showing relatively strong growth, up 34.8% year-on-year.

Recurring EBITDA in Colombia came-in at COP$107 billion (US$37 million) with an EBITDA margin of 4%, the result of relatively low inflation which impacts sales results.

“Complementary” businesses in Colombia including the “Éxito” credit-card business, the “Seguros Éxito” insurance business, the “Viajes Éxito” travel business, a money-transfer-service business, and the commercial real-estate business collectively grew by a total 31.2%, according to Exito.

In addition, its alliance with the “Rappi” home-delivery service resulted in a 300% jump in deliveries year-on-year in Colombia.

The “cash and carry” format offered at its growing “Surtimayorista” chain in Colombia now operates through nine stores, with sales up 138% year-on-year. “Stores converted to the ‘Surtimayorista’ brand have multiplied sales nearly twice and units [of products] sold have grown 74%. In 2018 the company plans to open at least eight more” of the warehouse-type stores, according to Exito.

Meanwhile, “the real estate business continues to be dynamic thanks to a good level of occupation of its shopping centers and galleries. The ‘Viva Envigado’ and ‘Viva Tunja’ shopping centers under construction have scheduled openings for the second half of 2018 and the construction works are progressing by 77% and 64%, respectively,” according to Exito.

Corporate-wide synergies between Colombia, Brazil, Uruguay and Argentina store operations are seen likely to deliver US$120 million in contribution to EBITDA for full-year 2018, according to Exito.

“Thanks to the implementation of the Colombian textile model in 61 points of sale in Brazil, Uruguay and Argentina, through our Didetexco division, we have become the ninth-biggest exporter of textiles from Colombia,” Exito added.

Meanwhile, in Uruguay, Exito store sales rose 8.5% year-on-year as measured in local currency, helped by summer-season demand, improvement in textile sales and the “Fresh Market” format, according to the company.

In Argentina, Éxito continues to benefit from its comercial real-estate business, with about 170,000 square meters of rentable space, the company added.

Éxito now has 1,554 retail food stores, including 561 in Colombia, 878 in Brasil, 86 in Uruguay and 29 in Argentina, according to the company.