Friday recharged for Cencosud: concrete acquisition of Giga supermarkets and reports record income – AméricaEconomía

Three announcements about its 2022 management were reported this Friday by the Chilean holding company Cencosud, owned by the Paulmann family and one of the most important economic groups in that country.

On the one hand, the company delivered the consolidated financial results for the first quarter (1Q) of the year 2022 where they show an increase in revenues of over 20%, which would have been driven by higher gains in market share in the supermarket segment in Chile. and Argentina, in addition to the increase in supermarket sales due to inflation in Colombia.

The company highlighted that the sustained increase in adjusted EBITDA is the result of improvements and automation of different processes, reductions in waste levels and efficiencies at a general level, partially offset by increases in inflation, higher costs associated with logistics and imports, devaluation of the Chilean peso and salary pressures.

Overall, Cencosud’s Adjusted EBITDA increased 29.4% during this first quarter, to US$475 million, with a reported growth of 21.2% compared to the same date last year.

E-COMMERCE PENETRATION

According to the data provided by Cencosud, excluding asset revaluation, profits grew almost double compared to the previous year, with US$ 3,700 million in consolidated income.

In this way, the net income is US$ 26 million, which implies a growth of 100.7% compared to the same date of the previous year.

18 new stores were opened: 3 Easy, in Chile and Argentina, 7 supermarkets – including 5 SPID stores – and 8 Electroshow in Brazil, representing more than 12,000 m2 of sales rooms, and another 17 were remodeled, with which seeks to improve the physical shopping experience, increase efficiency and optimize the digital experience.

In addition, the Company highlighted the sustained growth and penetration in e-commerce with an increase of 10% compared to the same period of the previous year, this despite the end of confinement in the markets where it operates and the progressive return to normality.

The online income of the holding company reached 287,081,076 million Chilean pesos (more than US$ 335,884 million), which represents a drop of 1.4% compared to 2021.

“I would like to highlight that the online penetration of our digital channel has remained in double digits at the regional level despite the gradual normalization of mobility in all countries. This has been achieved thanks to the development of new web platforms and mobile applications, while promoting the Jumbo Prime program and the consolidation of Spid, the latter achieving record daily sales during 1Q22”, explained Matías Videla, CEO of Cencosud in the statement that was sent to the media.

ARRIVAL IN SAO PAULO VIA CASH & CARRY

Cencosud entered this Friday the supermarket sector of Sao Paulo, the largest market in Brazil and South America, by buying for US$100 million the operation of GIGA, a cash & carry chain, a format that is called “attacked” in Brazil, with 10 stores located in the greater São Paulo and a distribution center in the same area.

The chain, founded in 2009, has more than 1,300 collaborators, its stores have 4,500 m2, are very well located, near accesses with many cars, a lot of movement, which makes the ten locations very attractive.

read also: “Chilean Cencosud acquires the Brazilian supermarket chain GIGA for US$ 100 million”

In financial terms, the company’s revenues in the last 12 months reached just over US$300 million and the purchase price of the operation reached a third of the sale, approximately US$100 million.

In any case, Matías Videla clarified that they may be adjusted based on existing working capital calculations at GIGA on the date the transaction becomes effective.

“With this operation, Cencosud manages to enter the largest state in that country, with the format that is growing the most, which is the “attacked” one, and the most resilient to recessive macroeconomic contexts. The truth is that we are very excited about the operation. Many years ago we were looking to have growth in Sao Paulo, it is difficult to have an operation in Brazil without having stores in Sao Paulo and we finally achieved it, so I think it is very good news and Giga as a brand is a tremendously valued brand in that market, with a high potential and with a very experienced administration, which is doing an extraordinary execution. So we are very happy and we hope, obviously, to expand this chain in the medium and long term, in order to have a more robust and strong operation in the largest market in South America”, explained the CEO.

read also: “Cencosud confirms that it is evaluating a merger in Brazil to strengthen its presence in the country”.

Cencosud also has the Gbarbosa, Mercantil Rodriguez, Perini, Bretas and Prezunic brands in Brazil, but in other states.

For the future, Videla stressed that they aspire to be a relevant operator at the Brazilian level. “We have been making a strategy of changing the formats, changing the supermarkets to attacked, we have been making a roll out both in the Minas stores and in the Gibarbosa stores, in order to have a higher share of this format over Cencosud’s billing, which is the format chosen by Brazilians”, he explained at a press conference.

The CEO also stressed that Cencosud Brasil has already had positive cash flow for three consecutive years, “which maintains Brazil as a financially solid operation, without debt and that it has even distributed dividends to the parent company, something that had never happened before,” he said. .

“Clearly we are going to put a lot of focus on cash & carry as part of our future strategy. This does not mean not to build more supermarkets in the future, but it does mean that we are going to prioritize growth in cash & carry over supermarkets. [tradicionales]he clarified.

Videla also highlighted that Cencosud is not resorting to debt to continue growing and said purchase was made entirely with funds from the local operation.

“Given the solid position of the parent company and also Brazil, which has zero debt at this time and positive flow, which allows it to invest and finance its expansion, without the need of the parent company. So Brazil will continue [creciendo]”, he concluded.

HIGHER GROWTH TO PRE-PANDEMIC LEVELS

During the morning, it was the turn of the results of the first quarter of Cencosud Shopping, in charge of the management of the real estate assets and malls of the holding company.

In this regard, the company highlighted the strength and positive performance in traffic and sales of the Shopping Centers it operates in the three countries where it is present: Chile, Colombia and Peru.

Among the outstanding figures for the first third of the year are the increase of 51.5% in Revenues and 54.2% in Adjusted EBITDA YoY, highlighting an Adjusted EBITDA margin above 90%.

The performance of Cencosud Shopping is explained by the normalization of the operation of all operations, reaching 100% operational in the first quarter of 2022, and the increase in visits and sales as mobility and capacity restrictions have been eliminated.

“We continue to see a vigorous recovery in visits to our shopping centers and sales figures consistently above pre-pandemic levels, which shows that malls remain essential in people’s lives and preferred places to buy goods and services. services, socialization and the search for experience and entertainment”, explained the CEO of Cencosud Shopping, Rodrigo Larraín.

“The results for the year are proof of the solidity of the business, reaching a growth of 52% in income and 54% in Adjusted EBITDA, compared to the same period of the previous year, thanks to a sustained growth in visits (+39%) and sale of tenants (21%), achieving 98% occupancy in 1Q22”, indicated Larraín.

Compared to the same period in 2021, traffic (face-to-face visits) increased 39%, totaling 25.9 million visits.

“Our shopping centers are differentiated by their locations in densely populated areas and preferentially connected to the city, with a greater variety in the mix and the strength of the anchor stores -such as our related companies-, generating a more complete shopping experience,” he explained. Larrain.

Cencosud Shopping announced an investment of US$ 100 million in remodeling projects, expansions, transformation of built square meters into leaseable ones and incorporation of larger spaces for gastronomy, entertainment and dark stores; as well as the incorporation of an additional 40,000 m2 of GLA in the next 12 months.

On the other hand, Torre Costanera continues to position itself as a premium office pole within Santiago with the incorporation of companies such as Amazon, Globant and Maersk, added to the start of operations of the Cornershop headquarters in the Costanera Center complex.

STOCKS DOWN

Despite the good news, both the shares of Cencosud SA and Cencosud Shopping fell on the Santiago Stock Exchange, by -0.88% and -1.52%, respectively.

“It fell despite the good news due to the 125 base point (bp) rise in the Monetary Policy Rate (MPR) that would curb consumption and the high April CPI of 1.4% monthly and 10.5% year-on-year , which implies that the MPR should rise again at the next meeting in order to stop the escalation of prices, which will again be an obstacle for consumption”, explained Guillermo Araya, manager of studies at Renta4 firm, in Chile.

The analyst believes that peak 12-month inflation will be seen in June and from that maximum it should begin to ease. We must bear in mind that the Russia-Ukraine war mainly affects the cost of oil, which influences all other prices, but on the positive side, we no longer have withdrawals from pension funds and that excess liquidity would disappear.

Regarding the purchase of Giga, in Brazil, Araya indicated that, more than being a relevant purchase from the point of view of the amount involved, it is relevant from the strategic point of view when entering a giant market such as Sao Paulo.

“From a financial point of view, in normal times one of the ways to value this type of business is through sales and in general it can be said that the market price is 1.0 with respect to the value of the company and its sales ( EV/sales), but in this purchase you are paying 0.33x, which shows a very convenient price”, concluded Araya.

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