EconomyFinancialChedraui lives the 'American dream': purchase of Smart &...

Chedraui lives the 'American dream': purchase of Smart & Final raises its profits

Chedraui closed 2021 with a good financial performance thanks to the stabilization of sales and the purchase of the Smart & Final price club in mid-2021. Annual consolidated sales -which also include Smart & Final- increased 28.8%, to 188,487 million pesos (mp). Only in the fourth quarter of the year, the retailer reached 65,079 million pesos in revenue, with a growth of 67% year over year, due to the favorable effect of the consolidation of both operations. On a comparable basis, not including Smart & Final revenues, growth for the fourth quarter of the year was 9.2%.

Grupo Chedraui bought the American grocery chain Smart & Final in mid-2021 for $620 million. “We are excited about the combination of Grupo Comercial Chedraui and Bodega Latina with Smart & Final, which further scales and expands our presence in the United States. This acquisition is in line with our long-term strategy of finding financially attractive and value-generating opportunities. ”, José Antonio Chedraui Euguía said then.

Currently, the retailer has its operation divided into three important axes. The first of these is the self-service operation in Mexico, where Chedraui’s sales grew by 11.8%, reaching 25,971 million pesos.

Same store sales increased 10.5% year over year, and five net stores were added to the list of branches in the quarter and 17 in the last 12 months, which represents a 0.7% growth in sales floor area. In 2021, the sales of said operation increased 9.4%, to 90,258 million pesos.

The second axis corresponds to the operation in the United States, where total sales grew 150.5% compared to the fourth quarter of the previous year. This is a reflection of the merger with Smart & Final, since the retailer accounted for 38,849 million pesos. On a comparable dollar basis, same store sales grew 11.5%.

However, in this last quarter of 2021, only 12 weeks were recorded, unlike the fourth quarter of the previous year, which had 13. According to its financial report, sent to the Mexican Stock Exchange, Chedraui had a growth of 3.1 in equal stores. % and total year income grew 54.7%, to 97,299 million pesos.

As for its real estate division, which is responsible for marketing premises with third parties for sale or rent, revenues in the fourth quarter grew 10.1% compared to the same period in 2020, as the retailer registered 259 million pesos. During the last year, it incorporated 36,455 square meters of profitable area, which represented a growth of 9.4%. In the annual accumulated, Chedraui registered 930 million pesos, which represents an increase of 9.1%, compared to the income obtained in 2020.

As of December 31, 2021, Chedraui operated 203 Chedraui stores, 66 Super Chedraui, 10 Super Che, 59 Supercito and 16 Smart & Final. And its real estate division has a leasable area of 424,987 square meters.

“Our self-service business is cyclical in nature and our sales and operating results fluctuate from quarter to quarter. Historically, we have experienced seasonality of our sales, due to strong sales during the Christmas season and with the implementation of the Good End in November of each year”, reads the financial report.

Grupo Chedraui’s net profit in the fourth quarter of 2021 reached 969 million pesos, with a margin on sales of 1.5%, equivalent to a growth of 19.4%, while in the annual consolidated, the retailer’s profits increased 28.8%, after registering 3,446 million pesos, which is equivalent to 1.8% of sales.

The operating flow also presented good results. From October to December 2021, it grew 65.5% compared to the same period of the previous year. This represents a record of 4,617 million pesos. But throughout the year, Ebitda grew 29.6%, going from 10,788 million pesos in 2020 to 13,981 million pesos.

The strategy to follow

The retailer expects a major element of its future growth to come from new store openings. This expansion strategy involves considerable expense and depends on a number of factors including the ability to find and secure the best locations, the hiring and training of qualified personnel, as well as the availability of additional capital.

However, “quarterly results of operations and profitability could fluctuate significantly, due to the time of opening of new stores and their operating results. For example, opening a store in a region where you already have a presence could affect the level of sales in existing stores. On the contrary, opening in an area where we have not previously operated stores could result in an initial rise in sales due to the novelty of our brand.”

On the other hand, this year Chedraui is included in the Bloomberg gender equality stock index, Gender Equality Index, with which it is now one of the 418 companies in the world that are recognized for their involvement in diversity and inclusion. It is also working on the first materiality study in its history, in order to implement best market practices in terms of sustainability.

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