Mexico Retailer Chedraui Sees Solid Sales Growth This Year
First Published Thursday, 26th April 2012 06:04 pm - © 2012 Dow Jones
--CEO Antonio Chedraui: Sales picking up this year versus 2011
--Same-store sales in first quarter hurt by remodelings, other factors
--Sees tougher permit process in wake of bribery allegations against Wal-Mart
By Laurence Iliff
Of Dow Jones NEWSWIRES
MEXICO CITY -(Dow Jones)- Mexican retailer Grupo Comercial Chedraui SAB (CHDRAUI.MX) sees sales picking up solidly this year both at existing and new stores, though there is likely to be more government scrutiny of the permit process for retailers generally in the wake of bribery allegations against chief rival Wal-Mart de Mexico (WALMEX.MX), Chief Executive Antonio Chedraui said Thursday.
"We see consumption stronger than last year, for sure," Chedraui said during a conference call with analysts.
In its first-quarter earnings report released Wednesday, the retailer said its sales rose 11% from the year-ago period at 14.80 billion pesos ($1.13 billion), with a 1.8% increase in same-store sales at its Mexican outlets versus a 3.3% slide in same-store sales at its U.S. stores. Net profit rose 2.2% to MXN372 million, the firm said in a filing with the local stock exchange.
Chedraui had 183 stores in Mexico and 37 in the U.S., as it added 26 new Mexican units and three more U.S. stores in the previous 12 months.
Antonio Chedraui said the firm is expecting better same-store sales in the next three quarters than in the first, saying they were hurt by store remodelings that reduced sales sharply at some locations, along with some "cannibalization" effects in which newly opened Chedraui stores take away customers from existing stores in some cities, although over time the arrival of new customers dilutes the effect.
Chedraui said on the conference call that same-store sales should grow by 3% to 4% in the current quarter and 4% to 5% in the second half of the year. Same-store sales growth so far in April is close to 4%, he said. The retailer is adding 15 stores in Mexico this year.
The CEO of the U.S. unit, Carlos Smith, said same-store sales there were hit by the re-openings of stores acquired from Fiesta Foods, along with cannibalization effects.
Chedraui B shares traded on the Mexican stock exchange were recently down 0.7% at MXN33.99.
Antonio Chedraui also discussed the possible effects to the Mexican retail industry of investigations into Wal-Mart de Mexico on allegations of using bribes to speed up the permitting process several years ago during its rapid expansion.
"We think, due to this situation, government officials will start to be more cautious, perhaps that will delay store openings, but we expect to be opening on time," he said.
Chedraui already has permits to build its planned 15 new stores this year, and doesn't expect any problems, he added.
The executive said building permits generally take several months to obtain and third parties are sometimes used to perform parts of the process. Once the stores are built, an operating permit is needed, he said, and that usually takes weeks if no problems are found with the construction.
Wal-Mart de Mexico could suffer "delayed growth" in the coming months due to greater scrutiny of the permitting process, he added.
-By Laurence Iliff, Dow Jones Newswires; (52-55) 5980-5184, firstname.lastname@example.org