Poland / Colombia: Biedronka delivered a strong performance. Ara heavily impacted by the lockdown
Updated: Jul 31, 2020
Discount Retail Chain Biedronka Poland delivered a strong performance with solid sales and EBITDA growth. Discount Retail Chain Ara Colombia was heavily impacted by the lockdown restrictions still in force. Both Discount Retail Chains are owned by the listed Portuguese retailer Jeronomo Martins.
In Poland, consumers, although more restrained than before the pandemic, remained responsive to strong value proposals that combine good quality and a competitive price. The country's food inflation went from 7.7% in the Q1 to 6.4% in the Q2. The gap between Biedronka’s basket inflation and the country’s food inflation was more pronounced in the second quarter of the year.
Biedronka adapted swiftly to the market conditions in April and May. It extended opening hours and implemented an assertive commercial strategy. In euro terms, Biedronka sales in H1 grew 7.8% to €6.5B (+3.4% to €3.3 bn in Q2). In the six-month period, Biedronka opened 34 new locations (29 net additions) and carried out 71 remodellings. Although the construction of new stores was suspended at the beginning of the pandemic, Biedronka finalized all the projects it had already started. Since the end of May, the company resumed the implementation of the projects in its pipeline.
In Colombia, the year began with a favourable economic environment. Discount Retail Chain Ara’s performance has been greatly impacted since April by the containment measures related to the pandemic. These measures remained in force throughout the quarter and were extended until the end July. In euro terms, sales increased by 18.8% to €423M. Despite the challenging environment, Q2 sales grew by 0.5% in euros with LFL of 1.1%. The company was strongly impacted by mandatory closures that resulted in a 30% reduction in trading hours. The banner opened 23 stores in the sixmonth period (15 net additions). The company has resumed the implementation of new projects in its pipeline at the end of Q2. However, the pace of the expansion is very slow due to the restrictive measures imposed on the construction sector in response to the sanitary crisis.
Discount Retail Chain Biedronka recorded EBITDA of €589 mn, an increase of 5.1% (+8.1% at constant exchange rate). The EBITDA margin was 9.0% versus 9.2% in the same period of last year. The discounter, with a reinforced cost discipline and solid sales growth, has managed to mitigate the impact of the increased costs of running the operation in the context of the pandemic while maintaining a relevant promotional dynamic and investing in the attractiveness of its proposal.
Discount Retail Chain Ara, after the very strong start of the year, operated in a context heavily impacted by the pandemic in Colombia, particularly in the last three months of the period. In H1 20, the discounter recorded a reduction in EBITDA losses from €20M in H1 19 to €19M in H1 20, which also reflects the devaluation of the Colombian peso. In Q2, with the significant slowdown in LFL growth not allowing for cost dilution and the weight of additional costs to manage the operation safely in the context of COVID-19 and of the restriction in place, there was an increase in losses generated at EBITDA level to €-16 mn from €-8 mn in Q2 19.
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