The president of Polish retailer Eurocash, Luis Amaral, has said that the VAT fraud scandal that impacted the business last year affected its full-year profitability.
In a letter to shareholders, published as part of the group's annual report, Amaral said that the group's performance last year "was influenced by the write-off caused by our allowing criminals to rob our company.
"As soon as the first signals appeared, we conducted an internal investigation with the help of the best and most reputable advisors."
This investigation meant that the retailer "lost concentration", Amaral said, and therefore "failed to achieve expected profitability" at year end.
He added that while Eurocash has "passed" the investigation in the eyes of the state, it could take "many years" for the business to reclaim the impairments created by the incident, "and it may even be impossible."
Eurocash posted a full-year net loss of PLN 71.7 million in 2017, compared to a profit of PLN 102.6 million the year before – a decline of 169.9% – as a result of the incident.
Sales were up 4.46%, to PLN 14.9 billion, compared to PLN 14.2 billion a year earlier, benefiting from an increase in Polish GDP (+4.6% last year) and a 2.0% increase in the consumer price index.
"As we look to the future, we are focusing on finding a number of new solutions, in the belief that, in a few years' time, the position of our customers in Poland will be stronger still," said Amaral.
"However [...] we face difficulties along the way, often caused by [our] own mistakes. I consider that the year of 2017 was particularly affected by such difficulties and mistakes," he added.
Divisional Structure
Eurocash operates across a number of different retail channels. Within its Independent Wholesale division, the business operates 180 cash-and-carry warehouses and supplies 8,531 'abc' franchise stores, as well as some 45,000 independent stores.
Its Integrated Wholesale division incorporates a number of franchise banners, including Groszek and Lewiatan, boasting 4,905 stores, and the Delikatesy Centrum business, which is the group's fastest-growing operation.
Amaral said that despite last year's challenges, Eurocash has "developed lot of solutions, which are destined to enhance the competitiveness of our clients", including a new fresh logistics platform and a new customer relationship management solution based on artificial intelligence.
"In developing these projects, we need to be sure that their costs do not negatively affect the short-term profitability of our company," he explained. "In this context, we have decided to split the Eurocash Group into two independently managed businesses: wholesale and retail."
Within the retail arm, Amaral added, Eurocash aims to open around 900 proximity supermarkets across Poland, including remote towns and villages, which will "allow us to accelerate work on innovations and bring a return much faster than before". It also recently unveiled plans to extend its new liquor store concept, Duży Ben.
He said that as part of the group's ongoing improvement projects, suppliers "will be able to take advantage of access to the tens of thousands of professionally managed stores of our clients, [as well as] have access to franchise chains and our own proximity supermarkets with a recognisable brand that is appreciated by the consumer.
"This is a long-term plan, and, in my opinion, we are on the right track to achieve it," concluded Amaral.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
