Disappointing sales knock Laurus for six

Related tags Laurus Retailing

Laurus, the Dutch retail group, last week reported sales of €3.8
billion for 2003, a decline of 8.5 per cent on the previous year
and a disappointment for the company which was beginning to see the
light at the end of the tunnel after several difficult years.

The company said that the decline in sales at its three main fascias Edah, Konmar and Super De Boer was due to the tough market conditions - most Dutch retailers were embroiled in a price war for the last few months of the year - and the reduction in the size of its store portfolio - 43 outlets were sold, taking the total to 728.

But even taking into account the disposals, the performances left the company with little to celebrate. At the Edah chain, for example, like-for-like sales decreased by 0.6 per cent, with company-owned stores in particular performing badly, with sales dropping 1.4 per cent. Ironically, franchised Edah outlets fared much better, lifting turnover by 2.3 per cent.

At Konmar, like-for-like sales decreased by 10.2 per cent, again with franchises doing significantly better, posting 3.4 per cent growth, than company-operated stores, which showed a 10.5 per cent drop in sales. Meanwhile, like-for-like sales at Super De Boer fell by 1.7 per cent, and while both company-owned stores and franchises registered declines, the latter group again fared somewhat better. Franchise turnover dropped 0.7 per cent, while company stores saw a 3.6 per cent decline.

Another reason for the poor sales performance was that Laurus' focus throughout the year was on its back-office operations rather than its retail outlets, and the company said that this focus was already bearing fruit.

"Numerous savings have been achieved in the logistics infrastructure, in purchasing, in IT and in finance and administration,"​ the company said in a statement, adding that the price reductions introduced by its various fascias had only been made possible by this effective cost-control programme.

However, the disappointing sales figures show that the focus for 2004 will need to be on the company's stores, and Laurus said that it had already begun to take action to make its various fascias more competitive.

For example, a number of medium-sized Konmar supermarkets are being converted into the Super De Boer and Edah formats, better suited for outlets of this size, with 40 or so already being rebadged and showing a considerable improvement. The remaining stores will all have been converted by mid-2004.

For the larger Konmar Superstores, meanwhile, Laurus is trialling a new approach in the Zwijndrecht and Zoetermeer stores, the initial results of which are encouraging.

Despite the disappointing sales figures, Laurus remained bullish about its prospects of reaching its principal target for 2003 - a return to profitability. "The price cuts implemented in the last quarter have obviously depressed Laurus' results for 2003, although the effect is mitigated to some extent by the cost savings that have been achieved,"​ the company said in a statement.

"The Board therefore stands by the forecast it gave at the time of the presentation of the 2003 interim figures that the company would post a modest net profit over the full year."

Ahold sale delayed again

Meanwhile, Laurus' main Dutch rival Ahold is still struggling to find a buyer for its Argentine unit. The company had originally planned to sell the Disco chain to Chilean retailer Cencosud, but negotiations broke down at the end of last year, leaving the way clear for French retailer Casino (itself a shareholder in Laurus) to buy the division, in association with local retail entrepreneur, Fransisco de Narvaez.

But Ahold announced last week that negotiations had once again broken down after both parties failed to reach a final agreement - almost certainly on who would be liable for compensation payments in an ongoing legal dispute concerning Ahold's former partner in Disco, the Velox group.

Ahold said that discussions on the sale of Disco were continuing with other interested parties - thought to still include de Narvaez - but that it was too early to comment further.

Ahold is selling off its Latin American business as part of a wide-ranging recovery plan after the discovery of a €1 billion hole in its accounts last year. Operations in Peru and Chile have already been successfully offloaded, and the major Brazilian unit should be sold soon - leaving just the units in Paraguay and Argentina to find a buyer.

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