- Retail chains have gone to a price war to win consumers. But this strategy is having an impact on their financial results.
- Lower margins and rising costs translate into reduced investment.
Biedronka faces unprecedented challenges
The Biedronka chain's revenues increased in the first half of the year in domestic currency by 4.5% y/y, to EUR 11.5 billion, and in the second quarter they increased by only 0.1% to EUR 5.8 billion. Lf sales fell by 0.2% in the first half of the year and fell by 4.6% in the second quarter. Biedronka's EBITDA amounted to EUR 878 million in the first half of the year, compared to EUR 872 million a year ago.
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Biedronka CEO: We Didn't Start the Price War
– In 2024, the Group faces an unprecedented combination:
a sharp drop in food prices and a significant increase in costs. This combination puts strong pressure on margins. Despite a significant increase in the minimum wage in Poland, the food retail sector is at a standstill, losing volumes. This lack of consumer dynamics has also contributed to a noticeable increase in competition in the food market. If consumer demand improves before the end of the year, this will have a positive impact on the company's results, Jeronimo Martins said in its financial report.
The priority for Biedronka will be to increase sales volume, which means further investments in prices, strengthening the competitive position. This may exert higher pressure on the EBITDA margin in the second half of the year than in the first half of 2024. The company plans to launch 130-150 stores and modernize approx. 275 locations.
Dino doesn't open new stores that quickly anymore
The Dino Group's sales revenue amounted to PLN 13.9 billion and was 15.1% higher than in the first half of 2023. LfL sales growth amounted to 1.8% compared to 20.3% growth a year earlier. Net profit amounted to over PLN 643 million. The chain opened 98 new stores compared to 116 in the same period last year. As of June 30 this year, the Dino chain consisted of 2,504 stores with a total sales area of 987,398 sq m.
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Dino spent PLN 696 million on store openings and new warehouses
In Q2 alone, the Dino Group's revenues amounted to PLN 7.24 billion and were PLN 694.3 million, or 10.6%, higher year-on-year. At the same time, the cost of sales increased by 10.1%, to PLN 5.6 billion.
In the first half of the year, the EBITDA result of the Polish retail chain decreased year-on-year by 1.6%, to PLN 1.013 billion. The EBITDA margin amounted to 7.28%, while in the same period a year earlier it amounted to 8.51%. In the second quarter of this year alone, the EBITDA result amounted to PLN 520.6 million (a drop of as much as 8.9% compared to the second quarter a year earlier), and the EBITDA margin was at the level of 7.19%.
The decrease in the EBITDA margin resulted from the higher growth rate of sales and marketing costs than sales revenues. The high growth rate of sales and marketing costs was primarily influenced by a significant increase in employee costs – explains Dino.
Michał Krauze, member of the board and financial director of Dino, informed that the company wants to continue improving the gross margin in the following periods. Dino estimates that in the second half of the year the EBITDA margin will be under pressure.
Eurocash Group focuses on savings program
Eurocash Group revenues in the first half of the year amounted to PLN 15.8 billion and were 1 percent lower year-on-year. In the second quarter alone, they amounted to PLN 8.2 billion and were 2.5 percent lower than in the second quarter of 2023. The Group also recorded a weak net result. The net loss in the first half of 2024 reached PLN 87.2 million, compared to PLN 1 million of profit recorded in the same period a year earlier. The EBITDA margin dropped by 0.4 percentage points, which translated into PLN 226 million of EBITDA profit.
From April to June this year, the Group recorded nearly PLN 8.2 billion in revenue (compared to PLN 8.4 billion in Q2 2023), and EBITDA profit amounted to PLN 226 million. Sales in the first half of the year amounted to PLN 15.8 billion (compared to nearly PLN 16 billion year-on-year), and EBITDA profit – PLN 365 million.
In a more difficult environment, the Group is focusing on its savings programme, strengthening its balance sheet and financial stability.
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Group layoffs cost PLN 11 million. The giant cannot cope with wage increases
The decline in profitability in the first half of the year was significantly influenced by one-off restructuring costs and the operating costs of the second Frisco warehouse opened at the end of last year, whose efficiency has been gradually increasing in parallel with the acquisition of new customers.
– Restructuring and optimization activities that we have been conducting since the fall of last year partially protect our profitability, but the entire market is under strong pressure from a very high increase in the minimum wage, low consumer optimism, and a price war. We are focusing primarily on keeping costs in check. In line with previous assumptions, we are working to balance the increase in the minimum wage by increasing efficiency – says Paweł Surówka, CEO of Eurocash Group.
Eurocash Group also maintains discipline in financial costs. In Q2, they amounted to PLN 61 million and have remained at a similar level since the beginning of the year. Shareholders also decided to pay dividends only in November, in order to optimize the Group's financial management.
Eurocash continues key projects of integrating wholesale businesses and modernizing the Delikatesy Centrum store model, which at the end of the first half of the year had already been adapted in 30 locations. Growth projects developed by the Group, primarily the Frisco online store and the Duży Ben alcohol store, once again recorded high sales growth, and segment sales increased by 14 percent in the second quarter of this year.
– Consumer sentiment has been falling slightly in recent months, but the leading consumer confidence indicator rose in August. This is a good sign, although we are cautious in expecting a quick improvement – it is clear that the entire industry is under great pressure. The current priority is to strengthen the Group's stability and resilience in order to safely get through the second half of the year – announces Paweł Surówka.
