Retail

The Company

With more than 38,000 employees and over 6m customers, Grupo Éxito is the leading company in Colombia’s retail sector, and the largest in South America. It operates 470 stores directly, with a presence in 87 municipalities in Colombia. The company has been operating for more than a century and maintains a market share of 44%. In 2007 Casino Group of France acquired control of the company and currently holds an almost 55% stake.

The company’s corporate focus is retail sales through a multi-format and multi-brand strategy that includes hypermarkets, supermarkets, convenience and soft-discount stores with top-of-mind brands Éxito, Carulla and Surtimax. It offers a variety of goods including food products such as fresh and perishables, groceries and packaged food, and non-food products, including appliances, textiles, digital products and apparel.

In addition to retail, and through alliances and joint ventures with industry specialists, Grupo Éxito offers its clients a well-positioned portfolio of complementary businesses. The company has a strategically located real estate portfolio, is the third-largest credit card issuer, the second-largest travel agency and the first seller of mandatory vehicle insurance in Colombia. Moreover, Grupo Éxito has 21 gas stations in its main hypermarkets and is the first retailer providing virtual mobile services in the country.

In 2013 it had COP10.7trn ($5.35bn) in net revenues and COP932bn ($466m) in EBIDTA, with a margin of 8.7% of sales and an increase of 8.5% compared to the previous year. Its operating profit was COP545bn ($272.5m), up 10.2%. At the same time, the company opened 58 new stores in Colombia during 2013, increasing its total to 470 stores. Its market capitalisation accounted for about 5.2% of the Colcap Index as of May 2014 and its stock traded above its peers in terms of its price-to-earnings ratio. Its earnings per share compounded annual growth rate for the period between 2014 and 2016 is expected to be 12%, lower than the peer median of 15%, according to JPM organ estimates.

Development Strategy

Grupo Éxito has implemented in recent years a dual model that combines its core retail business with real estate development. The model consists of strengthening the portfolio of leasable areas and working with commercial partners, and at the same time expanding sales areas to operate them directly. Leasable areas account for about 16.8% of the organisation’s operating profit.

In line with this strategy, during 2013 Grupo Éxito invested COP502bn ($251m) in the development of new stores and the modernisation of information technology and its logistics systems. It opened 58 new stores in Colombia, two stores in Uruguay, and advanced the consolidation of its VIVA Brand for shopping centres and commercial galleries.

In 2014 it will launch VIVA Villavicencio, a brand that will supplement the Barranquilla and Vizcaya projects currently under construction. Its objective is to penetrate 200 more towns and to continue to promote the “Click and Collect” service, which enables customers to collect products after ordering them online. Furthermore, in first-quarter 2014 the company announced the acquisition of Super Inter, the fifth-largest retailer in Colombia with a national market share of 3.7%. Super Inter is an independent retailer located in Valle del Cauca and the coffee-growing region, with a sales share of 22.8% and 17%, respectively.

Following the transaction, Grupo Éxito will own 50 Super Inter stores, with a total area of 53,000 sq metres. It will follow a two-stage transaction: a $100m payment for 19 stores a few days after the announcement, and the operation of the remaining 31 stores over a five-year period, with a fixed value of COP10bn ($5m) per year and a variable payment of 2% of net sales of the stores identified with the Super Inter brand.

The transaction will consolidate Grupo Éxito’s position as the main retailer in Colombia, as Super Inter sales were nearly $425m in 2013. It will also spur development in the discount format with another brand to compliment its current discount format, Surtimax.

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The Report: Colombia 2014

Capital Markets chapter from The Report: Colombia 2014

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