Auchan invests in prices to hold its sales in France

Auchan stems the rise in prices and recovers its sales in France. The leaders of ELO, the holding company which oversees the distributor, admitted on Tuesday that 121 million euros had been invested in the fight against inflation. The turnover of the Mulliez family group lost 2.7% – on a comparable basis excluding petrol – in France in the first quarter of 2022. Activity stabilized (-0.3%) at the end of June. At the same time, the subsidiary’s EBITDA fell by 74%.

“We are gradually passing on product increases,” explained Ludovic Delcloy, financial director of Auchan Retail, to analysts and the press. The latter “assumes” the decline in the result and announces that it will be the same in the second half, for a lower amount, however.

Eastern Europe on the rise

In France (52% of group turnover), the frequency of visits to stores has increased. The number of items in the carts has dropped and purchases are moving towards lower prices. Auchan managers are working to increase sales of their own brands. Customers are working to preserve their purchasing power. The use of data will allow the adjustment of prices.

The investment in prices in France penalized the results of Auchan Retail whose EBITDA lost 21% to 440 million euros. Revenue stagnated at +0.6% despite growth of 2.6% from Spain and Portugal, as well as that of 5% of the Eastern Europe division, which includes Ukraine, a country in which 37 out of 40 points of sale are open, and Russia. In Russia, under the effect of European sanctions, consumers have stocked up. The activity then slowed down.

The Russian subsidiary, which has 230 stores and employs 29,999 people, operates in “maximum autonomy in strict compliance with the European Union embargo” indicates Auchan, which stopped all investment at the start of the war. The position of the group does not change: he stays in Russia to feed the population. It does the same in Ukraine.

Asset impairments

At the same time, Auchan is continuing its development in Africa. The group has 36 stores in Senegal after two openings since the beginning of the year. It deploys all its formats throughout the country: hypermarkets, supermarkets, convenience stores, convenience stores in service stations, drive-thru, home delivery. The brand has invested in Côte d’Ivoire with five points of sale.

ELO’s real estate branch achieved higher results in the first half of the year. Ebitda gained 44%, to 183 million euros, with revenues up 8%, to 285 million. But if the leases for the premises rented by New Immo in its 700 shopping centers in Europe (including 225 in full ownership) are renewed, activity has not caught up with the level before the Covid crisis. The attendance of the “malls” is only 87% of that of 2019. Revenues and results are still slightly lower than those of the year before the crisis.

In the end, ELO, which includes Auchan and the group’s real estate, shows an almost stable Ebitda. But the net loss widened to 189 million against 22 million a year earlier. Exceptional charges amounted to more than 200 million during the first half. The depreciation of assets – 128 million for France, 100 million for Ukraine and Russia – show the impact of the crisis that the group is going through. Luckily, since the sale of its Chinese subsidiary to Alibaba, its debt remains contained at around 3 billion.