Auchan sacrifices its profitability to relaunch its French subsidiary

Auchan sacrifices its profitability to relaunch its French subsidiary

By 2022, Auchan aims to “draw a line under nine years of declining turnover” in France, where it develops 52% of its activity. This is the wish expressed by the distribution group, during the presentation of its half-year results, on Tuesday, August 30. A goal led by a new management team in France, appointed at the beginning of the year.

But, for now, the results remain low. At €7.9 billion in the first half, turnover in France fell 2% like-for-like, while it rose 3.4% in the rest of the group. Driven by fuel sales, the global entity Auchan Retail recorded a 6.2% increase in its turnover during the first six months of the year, to 15.4 billion euros.

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In France, especially, the operating profit (Ebitda) fell by 74% during the semester. In a context of relaunching its French subsidiary, Auchan sacrificed its margins so as not to pass on all the price increases it granted to its suppliers, in order to win back customers. It does not prepare an anti-inflationary marketing operation like other distributors, but rather a pricing policy aimed at guiding consumers towards certain products. “We are raising prices less in Auchan brands, which we want to highlight”said Ludovic Delcloy, CFO of Auchan Retail. For comparable items, the price increase on receipts would be just 4% in a year, at the end of June. This figure should be taken with caution, according to Delcloy, because “the proportion of comparable articles has decreased, so it’s complicated”.

“First positive signs”

Despite this recovery policy, the group perceives “First positive signs in France”Mr. Delcloy assures, as evidenced by the improvement in revenue, quarter over quarter, since the end of 2021. “balance in summer”, but also “a 6% increase in store traffic, especially in hypermarkets, and an increase in the customer satisfaction index”.

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The first changes in consumer behavior in the face of inflation are beginning to appear in stores, with a “decrease in the number of items purchased and evolution of products. We are making progress on our commodity sales.”continues the financial director.

In the whole group, the semester was also interrupted. Since the start of the conflict in Ukraine on February 24, Auchan has continued to operate some forty stores in the country (three have closed, two of which were damaged). And he is the boss, in Russia, of 230 shops that work “in total autonomy in compliance with the rules of the European embargo”says Mr. Delcloy.

An extension of losses

The group does not detail its results by country, but its sales in Central and Eastern Europe (Hungary, Poland, Romania, Ukraine, Russia) increased by 5% in comparable terms. In Russia, after a first quarter “that went well”, where customers bought mainly to store, sales fell in the second quarter, to reveal, during the summer, the first difficulties stemming from the economic crisis. The departure of brands (Ikea, H&M, Zara, etc.) from their shopping centers in Russia also penalized the flow to their stores in the second quarter.

At the level of the ELO holding company, which oversees distribution activities (Auchan Retail) and real estate activities (Ceetrus, Nhood), these developments and asset impairment led to a widening of net losses to €191 million in the first half , compared to 24 million the previous year.

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