Portuguese discount supermarket chain Minipreço, part of Spanish food retailing group DIA, has closed four stores in Guimarães and Vizela, leading to the loss of 130 jobs.
According to local daily Jornal de Noticias, the closures occurred due to accumulation of debts resulting from a drop of profit and unsustainability of the stores.
Employees put the blame squarely at the Spanish owner, claiming that the increase in profit margin has put the sustainability of the outlets under question.
The Association of Minipreço Franchisees and Ex-Franchisees (AFEDA) maintains that the main reason for the closures is dumping, since Minipreço forces them to sell products below cost price.
According to AFEDA, 1,000 entrepreneurs have failed due to the “false promises” of the retailer, adding it plans to initiate proceedings against DIA.
In the nine months to September, total sales of the DIA group in Portugal, where it also runs the Clarel stores (personal care products), reached €662.7 million, down 7.1 per cent on the same period in 2013, due to the adverse business conditions.
The Portuguese operations now represent of 9.7 per cent of gross group sales (compared to 10.3 per cent in 9M 2013).
In an analysis of the Portuguese retail sector, published last October, BPI warned that deflation is a major risk and that retailers should focus on quality rather than on price. BPI analysts pointed out that Minipreço should not focus only on promotions, but also "needs to invest in its stores” and “increase the perceived quality of its offer”.
The chain is also facing strong competition from Meu Super (due to the proximity of stores), Pingo Doce (prices) and discount chains such as Lidl (perception of quality).
Although BPI believes Minipreço can reverse the short-term adversity, it cannot rule out a “potential exit from Portugal” in the medium term, if the “trend not be reversed".
DIA currently runs more than 641 Minipreço supermarkets, with 289 franchised. There are Minipreço stores in town and city centres and larger Minipreço stores in city outskirts.
DIA’s private-label products are on sale across the Minipreço store network.
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