Retail

Grupo Éxito is a subsidiary of Groupe Casino, a long-standing French mass retailer with operations around the world. Through its subsidiaries, it is the largest retailer in Latin America as a whole and specifically in Colombia and Brazil. Groupe Casino holds a stake of about 54% in Grupo Éxito. Before its September 2015 acquisition of retail stores in Argentina and Brazil, the company had a network of 591 stores, with a leased area of 270,000 sq metres and 41,090 employees. Grupo Éxito’s market share adds up to 44% of the formal market in Colombia and Uruguay.

Retail Focus

Grupo Éxito’s corporate focus is retail sales through a multi-format and multi-brand strategy that includes hypermarkets, supermarkets, and convenience and soft-discount stores under brands like Éxito, Carulla and Surtimax in Colombia; and Disco, Devoto and Geant in Uruguay. Through joint ventures with industry specialists, Grupo Éxito also offers its clients a portfolio of complementary businesses, which continue gaining share in the firm’s financial results, particularly its real estate business. Grupo Éxito is the third-largest credit card issuer, the second-largest travel agency and the main seller of mandatory vehicle insurance in Colombia. The company also has 21 gas stations in its main hypermarkets, it is the first retailer providing virtual mobile services in the country, and it recently launched an international money transfer service.

In 2014, Grupo Éxito had COP11.4trn ($4.2bn) in operating revenues, increasing 6.8% compared to 2013, and COP956.5bn ($352m) in EBITDA, increasing 2.6% with respect to 2013, with a margin of 8.4%. Net income reached COP458.9bn ($168.9m), a 4.0% margin), increasing 4.7% compared to the previous year. During 2014, return-on-assets and return-on-equity where 4.0% and 5.6%, respectively. 2015’s results have been very positive up to the first half: revenues increased 22.2% with respect to the first half of 2013 reaching COP6.04trn ($2.2bn), while EBITDA increased 20.5% to COP418.6bn ($154m) and a 6.9% margin. In 2014, the average weight of Éxito’s stock in the Colcap Index was 5.2%, but in 2015 it was around 4.6%. Retail and utilities stocks are usually classified as defensive, because they deteriorate more slowly than other stocks in a negative climate. This was the case for Grupo Éxito until its acquisition, when the stock price began to fall more than the Colcap Index.

Development Strategy

Grupo Éxito has been implementing a dual model that combines its core retail business with real estate development. The company has been strengthening its portfolio of leasable areas and working with commercial partners, while at the same time it has been expanding its sales areas to operate them directly. Grupo Éxito have been expanding inorganically, with the latest acquisitions being Hipermercados Libertad in Argentina (subsidiary of Groupe Casino since 1998) and Grupo Pao Acucar (GPA) in Brazil, controlled by Groupe Casino since 2012. The deals added COP4trn ($1.5bn) to the company’s debt. An 18.8% stake was acquired from GPA (50% of stocks with voting rights), and 100% of Libertad. The transaction can be considered a cash-out from Groupe Casino, and the Éxito’s stock price declined accordingly.

GPA is the largest retailer in Brazil in food, furniture and household appliances, and the second-largest in cash and carry, and e-commerce. Libertad, in turn, has a market share above 14% in Argentina, operating primarily in the Córdoba region. The acquisition adds about 3m sq metres of space to Grupo Éxito. On a consolidated basis, EBITDA could reach $2.7bn (in 2014 terms), with 2500 stores.

Economic conditions have weakened substantially in Brazil and Argentina, where GDP is expected to shrink in the next two years, according to the IMF However, just as in Colombia and Uruguay, household consumption should be the main driver of economic growth as the middle classes of these nations expand.