Exito 3Q 2017 Net Loss Improves Year-on-Year

Medellin-based multinational supermarket giant Grupo Exito reported November 14 that its net loss for third quarter (3Q) 2017 came in at COP$31 billion (US$10 million), a big improvement over the 3Q 2016 net loss of COP$100 billion (US$33 million).

Net revenues grew 8.5% year-on-year, to COP$13.9 trillion (US$4.6 billion), while gross profit improved 5.3%, to COP$3.1 trillion (US$1 billion).

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) rose 5.5% year-on-year, to COP$670 billion (US$222 million), according to the company.

For first the nine months of 2017, net income rose to COP$30 billion (US$9.9 million), up sharply from a net loss of COP$148 billion (US$49 million) for the first nine months of 2016, the company reported.

The company’s expansion beyond Colombia into Brazil, Uruguay and Argentina is paying-off, with system-wide synergies now expected to deliver more than US$50 million in savings, according to Exito.

“The results in third-quarter 2017 keep us confident about the strategy followed on each of the countries in where the company operates,” said Exito CEO Carlos Mario Giraldo.

“In Brazil, we highlight the positive figures and growth of the food business through ‘Assaí,’ ‘Extra’ and ‘Pão de Açúcar’ [store brands].

“In Colombia, the expansion of ‘Surtimayorista,’ the innovation with ‘Carulla Fresh Market’ and the cost-cutting strategies will create differentiation in the long-run.

“In Uruguay, the convenience format with ‘Devoto Express’ continues as a strong contributor to results, and in Argentina, we see evidence of economic recovery and a real estate business that continues to contribute to the results,” Giraldo added.

The Latin America integration strategy includes “18 initiatives across the four countries, mainly related to the launch of a renewed loyalty program in Brazil, the exchange of best practices between Colombia and Brazil in supply chain to reduce shrinkage in perishables, and other synergies derived from the ongoing integration process between countries,” according to Exito.

“The gradual decrease of interest rates in Colombia and Brazil may lower financial expenses and trigger consumption levels,” while Exito also expects a “mid-term economic recovery in Colombia, Brazil and Argentina.”

Meanwhile, the company will focus upon “cost and expense control activities” and maintain an “expansion focus on high-return formats such as cash-and-carry in Brazil and Colombia.”

Exito also foresees a “high potential from store conversions and renovations of premium stores,” according to the company.

In Colombia, Exito forecasts that its capex spending this year will hit about COP$300 billion (US$99 million). Strategic priorities in Colombia include “focusing on cost and expense control activities and in profitable expansion to maintain profitability” as well as “strengthening the differentiation of textiles, the ‘fresh’ model from’ Super Inter,’ and private-label penetration to defend the company’s market positioning and to improve sales volumes in the country.”

A recently announced “Puntos Colombia” loyalty program “may improve the company’s strength for traffic monetization in the near future,” the company added.

In Colombia, Exito this year plans to open “25 to 30 stores in profitable formats, mainly in mid-sized cities to avoid cannibalization, including eight cash-and-carry stores, for a sales expansion of nearly 35,000 square meters,” according to the company.

As for real estate projects, “expansion of Viva Malls will represent an additional 120,000 square meters of [retail leased space] in 2018,” according to the company.

In Brazil, strategic priorities this year include opening five new “Assaí” stores and converting 15 other stores to this format.

Another 40 Brazil stores will continue to adapt the “Colombian textile business model,” while recurring EBITDA margin will rise to about 5.5% in the food segment, “derived from higher profitability in ‘Assaí’ and stability in ‘Multivarejo,’” according to Exito.

In Uruguay, Exito plans to add another 10 to 15 “Devoto Express” stores this year, while in Argentina, strategic priorities include adding another 35.000 square meters of leased retail space over the next two-to-three years, according to the company.