BELGIUM: Low prices pay off for Colruyt
By: just-food.com | 29 July 2008
Belgian discounter Colruyt has seen first-quarter sales rise 14.7% thanks to its policy of keeping prices low at a time when consumers are looking to tighten their belts.
Total sales rose to EUR1.57bn (US$2.47bn) during the quarter, the company said yesterday (28 July).
Colruyt's retail sales at the group's Colruyt, OKay and 5 Bio-Planet stores were up 13.2% to EUR1.2bn. Wholesale and food service revenues rose 14.5% to EUR260.5m and sales from other activities rose 33.5% to EUR109.3m.
The supermarket operator said that first-quarter sales growth was driven by its low pricing policy and Belgium's increased inflationary climate, which has intensified competition between retailers.
"The Colruyt banner stores as well as the OKay stores provide an answer to the demand for the lowest prices in combination with high quality products," the company said in its earnings statement.
Colruyt said that by getting this offer mix right it had managed to increase its share of the market. However, the group did not elaborate on the size of its share gain.
Colruyt said it would be provide full-year profit guidance at its AGM in mid-September.
At the end of June, the retailer said it anticipated sales at its Colruyt banner stores to grow by 7.75% this year.
Sectors: Retail
Companies: Colruyt
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There is currently 1 comment on this article
No comment on profit margins from Colruyt... One thing's sure, they ain't going up!
Retailers globally are caught between a rock and a hard place. The competitive set (or, ahem, a sense of altruism!) prevents them passing on food supplier price increases 1:1 to their customers, and there's limited scope to reduce their costs to absorb the profit hit. They can't squeeze the food suppliers as the food suppliers are not passing on costs 1:1 either.
On the one hand, the discounters or 'price leaders' see the current environment as an ideal time to highlight their relative value and, at a time of rising costs, they are actually cutting prices. The traditional retailers are scared stiff of losing market share short-term as the believe (maybe rightly) that new habits may form resulting in long-term market share losses, particularly as more well-to-do consumers realise that grubby, old Aldi is not quite so grubby after all. This is especially true of the UK. So, the traditional retailers are joining in the price-cutting frenzy... and they are all spiralling down into a place they'd all rather not be.
Conclusion: BUY quality, branded food suppliers and SELL every food retailer that is cutting prices... (that's all of them).
TheFoodAnalyst.com said at 5:54 pm, July 29, 2008
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