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French retailer Auchan raises cost-saving goal as profitability rises

Dominique Vidalon
·2-min read

* Auchan Retail full-year core profit up 27%

* Raises 2022 cost-saving goal to 1.4 bln euros

* Sale of Sun Art in China helped cut net debt

By Dominique Vidalon

PARIS, March 5 (Reuters) - France's Auchan on Friday raised its cost savings goal under its so-called Renaissance revival plan, which boosted 2020 profitability at its retail arm despite the COVID-19 pandemic.

Auchan, which reduced debt sharply last year with the sale of its Chinese subsidiary Sun Art Retail Group to Alibaba Group Holdings, on Friday posted a 27% jump in core profit in 2020 and said it would continue to sell some non-core assets in the first half of this year.

"Spurred on by its ongoing recovery, Auchan Retail is seeking to sustain this momentum in 2021," the group said in a statement.

Auchan said it is now targeting savings of 1.4 billion euros ($1.67 billion) by 2022, up from the previous target of 1.1 billion euros, having achieved savings of 664 million euros since launching the plan in 2019. For 2020 alone, savings reached 425 million euros.

The retailer faces fierce price pressure from the likes of Carrefour and Leclerc as well as competition from online giant Amazon.

To cope with changing shopping habits Auchan has been modernising its hypermarkets, accelerating its online expansion and focusing more on smaller convenience stores while improving operating efficiency and logistics.

Auchan Retail's earnings before interest, tax, depreciation and amortisation (EBITDA) reached 1.633 billion euros in 2020, up 27% year on year, with its EBITDA margin rising to 5.2% from 3.9% a year earlier.

This was achieved despite a 5.2% revenue decline to 31.627 billion euros, which Auchan blamed on pandemic-hit petrol sales and negative exchange rates. On a like-for like basis revenue was down 0.2%.

In France, where like-for-like sales were stable, Auchan Retail was hit by falling sales at large out of town hypermarkets during lockdowns, but this was offset by a 32% jump in online revenue.

The Auchan Holding group also includes the Ceetrus property arm, where net rental income fell by 27.4% to 389 milion euros because of the impact of the coronavirus crisis on store leases.

Net debt at Auchan Holding stood at 2.16 billion euros at the end of 2020, down 1.7 billion euros year on year, helped by the sale of Sun Art. ($1 = 0.8386 euros)

(Reporting by Dominique Vidalon Editing by David Goodman)