Economic conditions during 2015 cause a climate of uncertainty in the retail commerce sector

“Economic conditions deteriorated gradually in 2015 because of snap elections, prolonged negotiations between the Greek government and its creditors and the closing of banks in July, which caused a climate of uncertainty in the retail commerce sector,” Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst in IBHS SA said commenting on a survey on the supermarket sector in Greece.

This environment negatively affected the sector, as the market value of the supermarket sector dropped around 2.0 pct in 2015. More analytically, food sales grew 1.3 pct in the first half of 2015, but developments later with the imposition of capital controls in July caused a purchase spree in supermarket with sales in the first week of July jumping more than 30 pct -a temporary phenomenon as sales fell significantly in the following weeks.

An increase in VAT on several product and services and a negative sentiment among consumers led the food market to a 5.0 pct decline in the second half of the year. Despite prevailing adverse conditions, the largest players in the sector continued inventing on network expansion, purchasing smaller companies and intensifying a consolidation trend. This trend is supported by banks which seem willing to fund business formations with more healthy financial figures.

Following latest developments (partnership between Sklavenitis and Marinopoulos, acquisition of Veropoulos by Metro, purcahse of Makro Cash & Carry and Chalkiadakis by Sklavenitis), the top five super market chains control around 75 pct of the market.

Maria Metaxogeni, chief executive in IBHS said that “continuing takeovers and partnerships will lead to the creation of more robust business groups with stronger negotiating power towards suppliers. On the other hand, smaller super markets numbers will decline because of their inability to compete in a declining market”.
The survey analyzed financial reports by 112 enterprises in the sector. Accumulated turnover grew 1.6 pct in 2014 to 7.45 billion euros, EBITDA rose 8.0 pct to 334.39 million euros and pre-tax earnings rose 8.7 pct to 153 million. Average EBITDA margin eased to 3.7 pct and capital leverage improved slightly to 2.1/1