Grupo Éxito's Consolidated Results 2018

In 2018, Grupo Éxito recorded COP 279,000 million in net income (+28.3%) and consolidated net revenue reached COP 55 billion,
a 8.9% (1) growth versus the same period last year

Net sales (2) grew in the region: 10.7% in Brazil, 0.2% in Colombia,
5% in Uruguay and 27.9% in Argentina

Consolidated recurring EBITDA grew for the second year in a row to a 5.7% margin for 2018, +40 basis points versus 2017. 

In Colombia, innovative proposals contributed to sales growth: Éxito Wow and Carulla Fresh Market rose sales at implemented stores by low double-
digit and e-commerce sales grew by 33.4%.

In Brazil, sales rose 10.7% (2) driven by Assaí, the dynamism in Multivarejo and digital transformation initiatives.

 

  • The net Group Share Result was COP 279,000 million, an increase of 28.3% compared to 2017, derived from operational efficiencies and positive performance in all countries.
  • Innovation strengthened a path for differentiation: in Colombia, through the unique Éxito Wow and Carulla Fresh Market concepts that drove sales by low double-digit at implemented stores; and in Brazil, through the digital transformation of the customer loyalty apps "Cliente Mais" and "Clube Extra."
  • In Colombia, net revenue grew by 1.1% and the recurring EBITDA margin was 5.8%, a 3% growth versus 2017.
  • E-commerce sales grew by 33.4% in 2018 and comprised 3.4% of total sales in the country. Surtimayorista, the Cash and Carry format, encompassed 18 stores with sales that exceeded USD 100 million.
  • In Brazil, net revenue reached COP 40 billion, driven by the 24.2% growth in sales from Assaí, in local currency, along with the positive commercial performance of the Extra and Pão de Açúcar brands.
  • In Uruguay, sales grew by 5% (2) and the recurring EBITDA margin was 7.7%; it was Grupo Éxito’s most profitable business unit in South America.
  • The dual model in Argentina, which combines retail and real estate businesses, prompted a 27.9% (2) sales growth and a recurring EBITDA margin of 4.1%.
  • The synergies between the four countries exceeded the initial run rate goal.
  • The sustainability strategy and jointly work with Fundación Éxito, favored that more than 63,400 children under the age of five to receive better nutrition and care.
  • 92% of commercialized fruits and vegetables were purchased in the country, 82% of them, directly procured from 670 Colombian farmers.

 

Grupo Éxito's Consolidated Results (Colombia, Brazil, Uruguay, Argentina)

Grupo Éxito benefited from its diversification strategy in South America in 2018. This project has been under implementation since 2015 in Colombia, Brazil, Uruguay and Argentina.

The Company net income reached COP 279,000 million, a growth of 28.3% in 2018 compared to 2017. The outcome derived from operational and financial improvement.

The recurring EBITDA margin (3) grew for the second consecutive year and was 5.7% in 2018, +40 bps versus the previous year. Positive commercial performance, contribution of complementary businesses and expense control in all countries led to the increase.

The Group ended 2018 with 1,533 stores, thanks to the opening and conversion of 76 stores in the four countries. These were geographically diversified as follow: 554 in Colombia, 863 in Brazil, 89 in Uruguay and 27 in Argentina, which encompass more than 2.8 million square meters of total sales area.  The Company end 2018 with 140,000 employees.

In terms of synergies, the Company anticipated its initial run rate goal, thanks to the execution of more than 28 initiatives implemented during the past three years as part of the integration process.

"In 2018, innovation positively contributed to Grupo Éxito´s results in the region.  The Company posted Net Sales growth in all 4 countries, reached 1.533 stores, with 140.000 employees and led the omnichannel business.  In Colombia, Grupo Éxito focused its strategy on innovative models and modern virtual channels.  In Brazil, the solid top line growth derived from the consolidation of the Assaí banner, the dynamics of Multivarejo and the digital transformation strategy.  In Uruguay, the business unit posted a resilient performance amidst a challenging macro environment.  In Argentina, the dual retail – real estate strategy allowed the Company to post stronger results than the peer industry average.  We are also pleased with the outcome obtained from the synergy process, as the Company surpassed the run rate target set in 2018 as well as reached the total expected recurring gains at the consolidated level of USD 160 million, one year ahead of schedule.  Benefits from the synergy process reflected value creation for the Company in all countries.  Our focus going forward will continue to be on differentiated proposals for our customers through innovation and digital transformation activities” stated Carlos Mario Giraldo Moreno, CEO Grupo Éxito.

 

Grupo Éxito’s Consolidated Financial and Operational Performance
All figures expressed in millions of Colombian pesos (COP)

* Data excluding the FX effect and in local currency.

** Data excluding the tax credits effect.

 

Differentiation drove Colombia sales

Colombia experienced mixed behavior of macro comps during 2018, among economic and currency volatility and improved consumption with a greater dynamism of the non-food categories led by the FIFA World Cup.  Inflation stood at 3.2% and GDP was 2.7% year-to December 2018, according to DANE.

Net revenues in Colombia grew by 1.1% to COP 11.2 billion and recurring EBITDA margin grew 3% to 5.8%.Improved profitability derived from the commercial performance and operational excellence plans that helped the Company to grow expenses below inflation.

Results obtained in Colombia show the Company’s commitment in innovation. During 2018, efforts concentrated on enhancing the concepts of Éxito Wow, Carulla Fresh Market and Surtimayorista Cash and Carry and strengthening omnichannel and enhancing the real estate business with the country’s newest and largest shopping mall in the country, Viva Envigado.

  • Carulla Fresh Market, the healthy and sustainable concept of Grupo Éxito's premium brand, was implemented in six stores in the country (3 in Bogotá, 1 in Cartagena, 1 in Santa Marta, and 1 in Medellín). Carulla Fresh Market was recognized by the British firm, IGD Retail Analysis, among “16 Supermarkets to Visit in 2019” in the world and was also the only Latin America supermarket selected. Stores converted to this model have registered low double-digit sales growth since implementation.
  • Éxito Wow, the hypermarket of the future, offers superior customer service with a shopping experience connected to the digital world. The 2 Éxito Wow that opened in 2018, Éxito Envigado and Éxito Country, are the brand’s best performance stores and posted a low double-digit sales growth.
  • Sales in e-commerce channels (e-commerce, marketplace, home delivery, last mile and virtual catalogs) grew by 33.4% in 2018 and represented 3.4% of the Company's total sales (2.6% in 2017) in 2018 compared to the previous year. In 2018, the Company processed 2.7 million delivery orders (+118.2%). These positive results are due primarily to exito.com and carulla.com, which added more than 60 million visitors during the year, a 20% increase over 2017. Marketplace also helped on the positive trend by exceeding 1,000 vendors and 60,000 products offered.
  • The 18 stores of the Surtimayorista brand, the Cash and Carry format, continued to register double-digit sales growth after conversion. The format lures both the professional buyer (shops, hotels, restaurants, etc.) as well as the regular costumer.
  • Complementary businesses continued to contribute importantly to the profitability and growth of the operation in Colombia:

    • The Company maximized the value of its real estate spaces and in 2018 ended with a portfolio of 34 shopping centers and commercial galleries with a 96% occupancy rate.

      In 2018, Viva Malls opened two shopping centers: Viva Envigado, a new generation of shopping centers in Colombia, sharing unique commercial experiences in more than 138,000 square meters of space. During its first three months of operations, the mall received nearly nine million visitors. In turn, the 35,000-square-meter Viva Tunja shopping center, welcomed more than 240,000 visitors between October and December.

      In December 2018, Viva Malls, the real estate vehicle of Grupo Éxito and FIC (Fondo Inmobiliario Bancolombia), received as a contribution from Almacenes Éxito S.A., additional assets valued at more than COP 321.000 million.  As a result, Viva Malls now encompasses 12 shopping centers and 6 commercial galleries, for a total of 570,000 square meters of space.

    • Puntos Colombia, the loyalty program of Grupo Éxito and Bancolombia, issued more than 12,000 million points to its 15 million clients, through the network in its first five months of operations, joined by more than 30 allied brands.

 

Grupo Pão de Açúcar in Brazil posted solid performance

In Brazil, GDP grew by 1.1% for 2018 and inflation closed at 3.8%.  GPA reached COP 40 billion in net revenues for 2018 and a recurring EBITDA margin (3) of 5.5% (+52 bps).  Performance in GPA reflected the consolidation of the Assaí brand and the outstanding commercial performance of the Extra and Pão de Açúcar brands.

The Assaí banner totaled 18 openings and ended the year with 144 stores.  The brand increased sales by 24.2%, represented a 46% share in total food sales and became the fastest growing Cash and Carry brand in Brazil. 

Extra and Pão de Açúcar positioned as the most innovative trademarks in the market thanks to the consolidation of their loyalty apps "Clube Extra" and "Cliente Mais”.  These apps allow customers to access promotional discounts and redeem prizes and had more than 7.5 million downloads, 2 times versus 2017. The Company also partnered with James Delivery, to offer the last mile service to Extra and Pão de Açúcar to customers. 

Extra stores developed renewed commercial and promotional concepts that  allow the banner to improve its market share. Pão de Açúcar transformed 15 stores to the Fresh Market concept, which reflected growth of 7% over the regular brand.

During 2018, GPA launched two new commercial concepts to compete with regional supermarkets, Mercado Extra and Compre Bem; both banners totaled 23 and 13 stores respectively. 

 

The Uruguayan operation posted the best profitability for the Group in the region 

The macro environment in the country was challenging and affected by the slowdown in Argentina.  There was a 30% drop in tourism and GDP grew by 2%, a historically low level.

Despite this context, the Uruguayan operation recorded a 5.2% net revenue growth in local currency and reached a recurring EBITDA margin of 7.7%.  Grupo Disco was Grupo Éxito’s outstanding performer with the best profitability level in South America.

The Fresh Market concept implemented in six stores, reached to 15 in operation by the end of 2018, which accounted for 30% of total sales and grew by 8% in 2018 compared to the previous year.

The omnichannel strategy in Uruguay was strengthened with the launch of the last mile service and represented 2.1% of the total sales of the Devoto brand.

 

The dual model in Argentina allowed the Company to perform over peers

The devaluation in the country of near to 100% and inflation levels of 47.9%, significantly affected Argentinians purchasing power.  Libertad dual strategy, which combines the retail operation and a solid real estate business, ease the operation to achieve better financial results than the average obtained by peers.  The Company posted net revenue growth of 28.1% (2) and a recurring EBITDA margin of 4.1%.

In Argentina, the implementation of new proposals for the fresh product category inspired by the Fresh Market concept and the development of strong marketing plans for household and cellphone products, contributed to commercial success.

 

The implementation of 28 synergic activities allowed Grupo Éxito to exceed the run rate expected

Synergies between the four countries exceeded initial run rate from the development of 28 initiatives. These include:

  1. New business models: represented 51% of the benefits through 15 initiatives, including:
  • The Fresh Market concept, inspired by the positive experience in Uruguay, implemented in 27 stores in the region and totaling 42 in the four countries.  Stores posted higher growth versus comparable stores in each country.
  • The Cash and Carry format in Colombia, Surtimayorista, inspired by Assaí from Brasil, continued to expand with the opening of 10 new stores in Bogotá, Barranquilla, Cartagena and Medellín, reaching 18 by the end of the year. The transformed stores recorded nearly twice the sales versus the previous banner. 
  • The implementation of the Colombian textile model reached 61 locations in Brazil, Uruguay and Argentina.
  1. Cost efficiencies: These included 6 initiatives accounting for 25% of the benefits. The model of regional procurement of indirect goods, services and technology generated 10% cost savings on average. The exchange of best practices in the supply chain, waste management and operational excellence are among the most important synergies obtained.
  2. Economies of scale: 7 initiatives represented 24% of the total benefits, such as joint purchase of more than 930 containers of commodities in national and international markets, with savings between 5% and 21%. The Company reached sales of more than $2.3 million in USD in categories such as meat, coffee, biscuits and textiles, from exports of 16 national suppliers to other countries where the Group operates.

 

2018 was a year of contribution to the country´s development

For Grupo Éxito, sustainability is a permanent commitment to the planet and society.  Thus, the Company progressed on its five sustainability challenges that are an integral part of the Group's strategy.

The efforts on sustainability are focused, among others, on achieving the first generation with zero chronic malnutrition by 2030 (Gen Cero) and collaborating with small, medium and large suppliers to facilitate their own growth.