By Dominique Vidalon
PARIS (Reuters) – French retailer Auchan [AUCH.PA] said it was starting to reap the first benefits of its “Renaissance” revival plan, which lifted operating profitability at its core retail arm in the first half of the year, and it vowed to continue cutting costs.
Unlisted Auchan Retail said it aimed to achieve an Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margin of 6% by 2022 and for that it would need to seek additional savings of 1.1 billion euros.
This came as parent company Auchan Holding, which also includes the Ceetrus property business, suffered an exceptional loss of 1.54 billion euros in the first half, mostly tied to losses on the disposal of the loss-making operations of Auchan Retail in Italy and Vietnam.
Auchan Retail faces fierce price pressure in its home market from the likes of Carrefour <CARR.PA> and Leclerc and competition from Amazon <AMZN.O> as well as tough market conditions in Russia.
In March, the group unveiled a global action plan that notably entailed reducing indirect costs, renegotiating rents, reducing floor areas in some stores and closing loss-making stores in some countries. It also conducted a review of its businesses that led to the disposal of its loss-making operations in Italy and in Vietnam.
Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) at Auchan Retail reached 768 million euros in the first half 2019, a reported 12.1% rise year-on-year and a 6% rise on a comparable basis. The EBITDA margin reached 3.4% of sales compared with 2.5% at end-June 2018.
Revenue at Auchan Retail reached 22.7 billion euros at end June, down 2.4% at current exchange rates and down 0.4% at current exchange rates, mostly due to revenue decline in France and in Russia.
“These interim results show action taken by the Auchan Retail teams is contributing to the near-term turnaround of our company. The corner has been turned,” Edgar Bonte, Executive Chairman of Auchan Retail told a news conference.
He said it was premature to disclose where the group would seek additional savings of 1.1 billion euros but expressed confidence over recovery prospects in France and Russia.
He ruled out selling stores in France or Russia though some store closures were possible in Russia.
Auchan Retail is also working on a new three-year initiative to better focus its offer in its stores on exclusive and local products.
(Reporting by Dominique Vidalon; Editing by GV De Clercq)