Polish wholesaler Eurocash Group has posted a 7.5% increase in sales in the first quarter of 2018, to PLN 5 billion (€1.17 billion).
The group said that its quarterly performance was driven by a 7.2% increase in sales in its wholesale division, as well as an 8% increase in its retail arm, which also includes fresh produce distribution.
"Our result is all the more meaningful due to the fact that it is not driven by acquisitions but rather mainly by organic growth in the wholesale segment," commented Jacek Owczarek, CFO and member of Eurocash Group’s management board.
Consolidated gross margin on sales in the first quarter stood at 11.6%, compared to 11.4% for the same period the previous year, with EBITDA up 5.7% year-on-year to PLN 39.6 million.
Positive effects on the group's EBITDA came from the group's cost optimisation programme, which generated PLN 14 million worth of sales in the first quarter. At the same time, however, higher remuneration costs had a negative effect on EBITDA.
Remuneration costs at the business were PLN 22 million higher, with the group saying that "Eurocash Group, along with the entire FMCG industry, is feeling the effects of wage pressure."
Store Conversion
Eurocash continues to integrate EKO stores into its portfolio, with some 41 outlets rebranded to Delikatesy Centrum in the first quarter, Owczarek added.
“An accelerated remodeling has a negative impact on this segment’s sales and EBITDA in the short term but we are seeing positive effects of these changes once the rebranded and renovated locations are re-opened. Solid sales growth of nearly 9% in this year’s first quarter was recorded by own Delikatesy Centrum stores.
"Franchise stores in this network are recording strong like-for-like sales growth. Eurocash’s wholesale to Delikatesy Centrum franchise stores on a like-for-like basis went up by 8.6% y/y, while retail sales at these locations, on a like-for-like basis, increased by 6.3%."
Project Investment
Also impacting the group's profitability at present is the level investment in its Projects segment, which includes the ongoing development of the Duży Ben and Kontigo banners, as well as an improved fresh produce distribution platform.
The group invested around PLN 14 million in these projects in Q1 2018.
"We are certain that in the long term these investments will translate into higher competitiveness of independent Polish entrepreneurs operating small and medium retail stores, who are Eurocash Group’s main clients," said Owczarek.
"Having achieved success with the Faktoria Win and PayUp projects in recent years, this year we decided to make the Duży Ben off-licence concept available to franchisees. Moreover, in accordance with our updated strategy presented in March, deliveries of high-quality fresh products, previously implemented only at the Delikatesy Centrum chain, will also cover stores in the other networks supported by Eurocash Group.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Branislav Pekic. Click subscribe to sign up to ESM: The European Supermarket Magazine
