Wholesale: strong organic growth
Sales in Eurocash Group’s wholesale segment advanced by nearly 7% y/y in the third quarter of 2019 to PLN 5.09 billion.
“The quickly-growing sales of tobacco and impulse products, reaching nearly 17%, drove sales growth in the wholesale segment, with other distribution formats recording good sales as well, especially the active distribution format to our franchisees, which grew by 14%. Given the fact that cigarette sales are low-margin and considering the very strong results last year, the wholesale segment’s EBITDA remained on a level similar to the previous year. Current profitability is also influenced by the further integration of Eurocash Alkohole with Eurocash Dystrybucja, which is yet another stage in the segment’s cost optimisation,” explained Jacek Owczarek, CFO and member of Eurocash Group’s management board.
Wholesale-segment EBITDA in Q3 2019, prior to the use of IFRS 16, reached PLN 130 million, and over PLN 177 million with IFRS 16 applied.
The number of stores in the abc chain, which is the main customer of the Cash&Carry wholesalers, was 8 816 at the end of September 2019, up by 63 stores in the third quarter and by 257 year-on-year. The number of partner and franchise stores in the Groszek, Euro Sklep, Lewiatan and PSD (Gama) chains, which are catered to by Eurocash Dystrybucja, was 5 087 at the end of the third quarter of 2019, up by 47 stores from the preceding quarter and by 144 from the previous year. Retail: profitability up thanks to improved results at acquired supermarkets
Eurocash Group’s sales in the retail segment in Q3 2019 reached PLN 1.52 billion, up by 7.5% from the same period of 2018, driven by 6% growth in sales to Delikatesy Centrum franchise stores and 8.5% sales growth at own supermarkets (operating as Delikatesy Centrum and Mila), as well as 8% growth in sales at the Inmedio newsstands.
Retail-segment EBITDA reached PLN 74 million in Q3 2019, and nearly PLN 33 million on a pre-IFRS basis, compared to just under PLN 12 million in the preceding year (up by 179% y/y).
“The strong improvement in retail-segment profitability is mainly the effect of significantly better results at the former EKO stores and the Mila chain. Following a period of integrating the acquired supermarkets with Delikatesy Centrum, which was associated with additional costs, we start to recognize their positive operational improvements. Integration is a very complex process, one that continues, but the most important thing is that it is progressing as planned and that from the new year all stores will be managed as part of a single organisational structure,” said Jacek Owczarek.
A chain of small supermarkets being developed by Eurocash Group (which will eventually be branded as Delikatesy Centrum) had 1 561 locations at the end of September 2019, including 986 franchise stores and 575 own stores. The Inmedio chain had 445 sites at the end of this year’s third quarter. Eurocash Group’s selected consolidated financial results for Q3 2019: Eurocash Group’s selected consolidated financial results for 9M 2019: