Belgian market leader Colruyt (Colruyt Group) saw its turnover increase in the past six months only due to price increases: volumes are falling. The cash & carry discounter cannot fully pass on the sharply increased costs to the consumer, which halves the profit.
Lowest price guarantee
In the first half of the broken financial year 2022/23, Colruyt Group saw its turnover increase by 5.7%, but this is only due to price increases, which compensate for the lower volumes. At the same time, the company's operating costs increase significantly as a result of higher energy tariffs, transport costs and wage indexation – the biggest impact of which has yet to follow.
Because Colruyt sticks to a lowest price guarantee in its main store formula, the retailer cannot fully pass on these increased costs to the customers, and that weighs on the margins. Operating profit fell to 123 million euros (2.3% of turnover), net profit fell to 89 million euros (1.7% of turnover). That's about a halving, and a lot worse than what analysts had expected.
No market share gain
The discounter does not gain market share in this period of fierce price competition: the market share in Belgium of the supermarket formulas Colruyt Lowest Prices, OKay and Spar together remained virtually stable at 30.9%. At Colruyt, turnover increased by 2.6%, at OKay, Bio-Planet and Cru, turnover fell by 2.6%.
Wholesale sales increased by only 1.3%, indicating that spar neighbourhood supermarkets are also experiencing strong volume declines. Online sales – mainly via the Collect&Go shopping service – now represent 7% of retail turnover. In France, turnover increased by 10.7%. In non-food, sales increased by 22.1%, mainly due to the expansion of bicycle shop chain Bike Republic. Foodservice grew by 38.5%: volumes did increase here.
In short, Colruyt is having a very difficult time in these exceptional times and improvement is not immediately in sight: "The coming months will also remain very challenging, with a gloomy macro-economic outlook that will further influence the spending pattern of consumers," says CEO Jef Colruyt.
The retailer expects the result to fall on an annual basis in percentage terms in the same order as in the first half of the financial year.
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