July 24, 2024

Taylor Daily Press

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Colruyt’s profit nearly halved |  standard

Colruyt’s profit nearly halved | standard

For a long time Colruyt was the uncrowned king among the Belgian opponents. But for how long? Rising costs and targeted promotions of competitors almost halve the profits of the retail chain.

The Colruyt supermarket chain is caught between a rock and a hard place. This hurts more financially. Although the retail chain’s turnover rose slightly in the first half of the financial year to 5.3 billion (+5.7 percent), net profit almost halved (-45.1 percent) to 89 million euros.

This is an unexpected setback for Halle’s antagonist series. Analysts were hoping for (much) more profits.

The explanation for the weak numbers lies in very poor market conditions, which according to CEO Jeff Colroyt “will continue to be very challenging” in the coming months.

fierce competition

Colruyt sees its profit margin melting further due to the bitter competition among supermarkets, which has also continued to launch targeted promotions in recent months. The commercial spirit of Dutch rival Albert Heijn in particular hurt Kolreuth in that area.

Analysis: Colruyt, once a rock in the surf, is breaking through the pain threshold

At the same time, transportation and heating costs and wages continue to rise. High costs that Colruyt can only pass on to customers in part, if only because the chain doesn’t want to give up on its promise of the lowest prices in discount supermarkets. And all this while consumers remain deeply unsure due to soaring inflation and the war in Ukraine.

As a result of all this, Colruyt’s gross margin has fallen over the past six months from 26.9 to 26.4 percent of turnover — the only number that was slightly better than analysts expected. For the rest, Colruyt went under the bar just about everywhere. Even a slight increase in turnover must be kept in mind. This is mainly due to inflation, which is partially offset by lower volumes. The good news is that Colruyt will retain its 30 percent market share.

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So, Colruyt isn’t panicking (yet). In the Financial press release The chain of stores promises “maximum cost control and productivity improvement” in the coming months. This will be necessary, because the explanatory notes to the numbers indicate that Colruyt expects the largest wage index impact only in the second half of the split fiscal year.

Colruyt also sticks to its early earnings warning. The retail chain expects the consolidated result for the full fiscal year 2022/23 to decline by as much as during the first half of the year.