French retailer Auchan cautions on virus uncertainty as revival plan lifts earnings

France's Auchan said on Friday it was reaping the first benefits of its revival plan which lifted 2019 operating profitability at its core retail arm. Auchan, however, warned of a potential impact of the coronavirus outbreak on its Chinese hypermarket operator Sun Art Retail which is already struggling amid fierce competition. About 27% of Auchan's revenue is earned in Asia. Read More...

* Auchan Retail 2019 EBITDA 1.831 bln euros, up 14% yoy

* Auchan Retail sticks with 6% 2022 EBITDA margin forecast

* Uncertain about coronavirus impact on China, Sun Art

By Dominique Vidalon

PARIS, March 6 (Reuters) – France’s Auchan said on Friday it was reaping the first benefits of its revival plan which lifted 2019 operating profitability at its core retail arm.

Auchan, however, warned of a potential impact of the coronavirus outbreak on its Chinese hypermarket operator Sun Art Retail which is already struggling amid fierce competition. About 27% of Auchan’s revenue is earned in Asia.

“The evolution of economic results …depends on the consequences of COVID-19 on the Chinese economy and on Sun Art results, which it is too early to estimate, as well as on other countries,” the group said in a statement.

Earnings Before Interest, Taxes Depreciation and Amortisation (EBITDA) at unlisted Auchan Retail reached 1.831 billion euros in 2019, a rise of 14% year-on-year and a 9% rise on a comparable basis.

The EBITDA margin reached 4% of sales against 3% in 2018 despite a decline in revenue of 1.4% to 45.8 billion euros, which Auchan blamed on France and Russia.

“These annual results confirm the momentum seen in the first-half and show actions conducted by Auchan Retail teams are on the right track, that of a recovery in the short-term,” Auchan Retail Chairman Edgard Bonte said in a statement.

Auchan Retail notably faces fierce price pressure in its home market from the likes of Carrefour and Leclerc and competition from Amazon.

In order to improve its results, Auchan has cut costs and closed or sold non-profitable stores in France, Russia, Spain, China, Ukraine and Poland. It also exited loss-making operations in Italy and in Vietnam last year.

To cope with changing shopping habits, the group has also launched a plan to modernise its hypermarkets, accelerate its online expansion and focus more on smaller convenience stores.

Auchan Retail stuck with guidance that it aimed to achieve an Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margin of 6% by 2022 and for that it would need savings of 1.1 billion euros. (Reporting by Dominique Vidalon; Editing by Elaine Hardcastle)