Exito’s 1Q 2016 EBITDA, Sales Soar, but Profits Slump Year-on-Year

Medellin-based Grupo Exito – now Colombia’s biggest private-sector company and a leading multinational retailer in the largest South American markets – on May 27 reported that its first quarter (1Q) 2016 earnings before interest, taxes, depreciation and amortization (EBITDA) soared 234% year-on-year (y-o-y), to COP$502 billion (US$163 million).

Operating income also jumped to COP$18.5 trillion (US$6 billion), up more than 500% owing to Exito’s recently acquired retail divisions in Brazil, Argentina and Uruguay.

However, 1Q 2016 net profits crashed to COP$947 million (US$308,000), down 99% from COP$67.8 billion (US$22 million) in 1Q 2015, mainly because of Colombia’s recently enacted “wealth tax” (which cost COP$51 billion/US$16.6 million), plus exceptional restructuring costs for its new regional platform, and financing costs, according to the company.

Sales grew 7.4% y-o-y in Colombia (hitting COP$2.65 trillion/US$863 million), while rising 19.7% in Uruguay, 30.7% in Argentina and 3% in Brazil, according to Exito.

Food items represented 60% of Exito’s corporate-wide sales.

Exito now has close to 60 million retail customers, 2,554 outlets, and 800,000 square meters of shopping-center space rented to third parties, according to Exito president and managing director Carlos Mario Giraldo.

Colombian operations not only saw sales grow by 7% y-o-y –- in-line with inflation — but also delivered a 23% boost in operating income. The best-performing divisions in Colombia were the “Carulla” supermarket chain (a “premium” format) as well as the discount-format “Surtimax,” “Super Inter” and “Aliados” stores, he said.

The “Exito” name-brand stores also saw sales rise 6.4%, y-o-y, he said.

The improvements in operating income in Colombia were partly the result of growth and profitability in Exito’s real-estate development division, its credit and insurance operations, its travel agency operations and its money-transfer services, all of which contributed one-third of operating income in Colombia.

Savings efforts and productivity improvements enabled Exito to absorb the impact of inflation, especially in salaries and utilities.

Colombia-operations EBITDA rose 20% y-o-y, to COP$158 billion (US$51 million), while operating margins rose to 5.7%, from 5.2% in 1Q 2015.

As for Brazil operations, Exito’s “Grupo Pão de Açúcar” division showed a 10.9% rise in sales – to COP$14.8 trillion (US$4.78 billion) — despite macroeconomic headwinds in that country, Giraldo added. The “Assai” cash-and-carry (hypermarket) division in Brazil had especially good results, with sales up 36% y-o-y, as Brazilian consumers show an increasing preference for discount goods.

Because of this trend, Exito will continue to expand its “Assai” stores, accompanied by “drastic” reductions in costs and expenses.

As for Uruguay operations, operating income rose 19.5% — well above that nation’s 10.6% inflation rate — to COP$637 billion (US$206 million), according to Exito. The favorable results reflect growing consumer demand and consumer preference for the company’s “Devoto” branded goods.

Uruguay division EBITDA rose to COP$63 billion (US$20.7 million), up 32% y-o-y, according to Exito.

In Argentina, operating income at the “Libertad” stores rose 20.7%, to COP$328 billion (US$106 million). Sales benefited from the new “monthly bargain” consumer promotional campaigns on 1,000 basic items at “very good prices,” according to Exito.