G&G sees strong profit growth

G&G operates a number of hypermarkets in south west France under the Carrefour banner, and partners the larger group in a number of others. The two companies are also partners in Spain via CCC, and G&G increased its stake in that business from 7.2 per cent to 8 per cent back in 2002, taking on a share of the goodwill costs at the same time.

But G&G decided to amortise these costs in one go, a decision which meant that profit growth of 30 per cent in 2001 was reduced to just 6 per cent last year - but which also meant a return to double digit increases in 2003.

Net profits were €50.4 million in 2003, despite a 0.8 per cent drop in sales to €1.19 billion due to the sale during the year of 11 in-store vehicle centres owned jointly with Carrefour through their Sogara venture.

The performance was not helped by the continued sluggish spending levels in the French hypermarket sector, already pinpointed by Carrefour as a cause for concern. But a closer focus on own-label products and better supply chain management enabled G&G to lift pre-tax profits at its wholly-owned stores despite not increasing prices.

Thankfully, the Spanish business was not affected by the same downturn in consumer spending, posting a 5.8 per cent increase in like-for-like sales during the year, in turn contributing to a 16 per cent increase in pre-tax profits.

Sogara, meanwhile, saw its sales fall €17 million as a result of the vehicle stores disposal, although pre-tax profits rose by 4.5 per cent as a result of supply chain efficiencies and the centralisation of management functions.

Because of the continued concerns about the hypermarket sector in France, G&G said it would concentrate most of its expansion efforts on the supermarket sector in 2004, opening one new Champion outlet and expanding two others. Two existing hypermarkets will be expanded during the year, while three new Spanish hypermarkets should also open their doors.