dia 2017 capital markets day- company sees growth ......2017/06/23 · dia’s management...
TRANSCRIPT
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DIA 2017 Capital Markets Day: Company Sees Growth Opportunities in LatAm Expansion and Spanish E-Commerce
1) AtDIA’sthirdCapitalMarketsDay,managementemphasizedthecompany’sstrategyofcustomercentricity,whichhasputcustomerdataandviewsattheheartofdecisionmakingsince2012.
2) DIA’sgrowthhasbeenfueledbystrongperformanceinLatinAmerica.ThecompanyplanstogrowstorenumberssignificantlyinBrazilandArgentinaby2020.
3) Thecompanyisreducingcostsbyrenegotiatingstoreleases,drivingproductivityinlogistics,andenteringintocommercialallianceswithothermajorretailers.
4) InSpain,DIAexpectstogrowitsonlinesalesbysixtimes,tomorethan€120million,by2020.E-commercecouldbeasignificantcompetitiveadvantageforDIAinaSpanishmarketthatisstillinanascentphaseofonlinegrocerydevelopment.
SpanishgroceryretailerDIAhosteditsthirdCapitalMarketsDayinLondononJune21,andtheFungGlobalRetail&Technologyteamwasinattendance.
DIAfocusedonthefollowingthemes:
• Customercentricityisdrivingdecisionmaking.
• DynamicgrowthinemergingmarketsinLatinAmericaissupportingtop-lineexpansion.
• Operationalefficienciesareenablinglowprices.
• Therearee-commerceopportunitiesintheSpanishmarket.
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
CEORicardoCurráspledgedtoconcentrateontwopriorities:
1. Thecompanywillbe“100%customercentric”within18months.
2. Itwillusedigitalchannelstointeractwithcustomers,developnewchannelsthroughwhichtosellandcommunicate,andgainefficiency.
CustomerCentricityDrivesDecisionMakingManagementstronglyemphasizedthatthecompanyhasbeenfollowingastrategyofcustomercentricitysince2012.Thestrategyputscustomerdataandviewsattheheartofdecisionmaking.DIAhascapturedcustomerdatathroughitsloyaltycard,whichhasa90%adoptionrate,aswellasthroughfocusgroupsandonlinecustomerfeedbacktools.
Onetakeawayfromthiscustomerfocushasbeenthat,whilepriceremainsthenumberonereasonforchoosingaretailer,shoppers’expectationshaveincreasedintermsofproductranging,in-storeexperienceandomnichannelservices.DIAhasbeenrefittingandreformattingstoresinitslegacyIberianbusiness.Ithasalsouseddatatoreduceout-of-stocksandimproveranging.
DynamicGrowthinEmergingMarketstoFuelRevenueIncreasesDIA’sgrowthhasbeenfueledbytwoelements:acquisitionsinitstraditionalmarketsofSpainandPortugalandstronggrowthinLatinAmerica.From2011through2016,DIAgrewsalesinBrazilandArgentinabyacompoundannualgrowthrate(CAGR)of28%atconstantexchangeratesandgrewEBITDAbyaCAGRof36%.
RevenueandEBITDAgrowthinBrazilandArgentinaSource:DIA2017CapitalMarketsDaypresentation
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Lookingahead,thecompanyseesthefollowingopportunities:
• InBrazil,robustmarketgrowthandlowpenetrationratesformodernretailformatsprovideopportunitiesforDIAtogrow.Thecompanyplanstoexpanditsstoreestateinthecountryfrom1,050attheendof2016tomorethan1,500by2020.
Brazil’sfoodretailmarketSource:DIA2017CapitalMarketsDaypresentation
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
• InArgentina,DIAexpectsconsumerpricesinflationtomoderatefromitscurrent,veryhighleveltoapproximately5%by2021.AsinBrazil,marketgrowthandastrongpresenceoftraditionalretailersprovidesopportunitiesinArgentina,andDIAplanstogrowitsnumberofstoresinthecountryfrom872attheendof2016tomorethan1,100by2020.
Argentina’sfoodretailmarketSource:DIA2017CapitalMarketsDaypresentation
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Inaddition,DIAseesscopeforconsolidationintheSpanishgrocerysector,whichremainsrelativelyfragmented.IntheQ&Asectionofthemeeting,anattendeeaskedmanagementifthecompanyhasplanstodrivethisconsolidation,andexecutivesrespondedthattheyexpectthisprocesstooccurnaturallyassmallerindependentplayersfalloutofthemarket.ManagementcitedtheinvestmentsneededintechnologyasonereasonsmalleroperatorsmaystruggletocompetewithlargerretailerssuchasDIA.
LowerPricesComefromLowerCostsDIA’spropositionisbasedonlowprices,anditcontinuestopursueefficiencies,includingthroughtechnology,toenablethisfocus.
Thecompanyachievescostsavingsthroughanumberofmeans,including:
• Renegotiatingone-quarterofrentalcontractseachyear,yieldinganaverage15%rentreduction.
• Drivingproductivityinlogistics,includingusingproductivityprofitsharingtoincentivizestaffandbigdataanalysistoreducesupplychaincosts.Real-timelogisticsdashboardsandstore-managementappsleveragetechnologytodriveefficiencies.
• Establishingnationalandinternationalcommercialalliances.AninternationalalliancewithGroupeCasinoandnationalallianceswithEroskiandIntermarchéincreaseDIA’sscaleinsourcingbrandedproducts,privatelabelgoods,andassetsandsupplies.ThechartbelowshowshowDIA’sbuyingscaleisboostedbyitsalliancewithCasino.
DIA’sbuyingscaleisboostedbyitsalliancewithCasinoSource:DIA2017CapitalMarketsDaypresentation
SpanishgrocerymarketsharebreakdownSource:DIA2017CapitalMarketsDaypresentation
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
E-CommerceOpportunitiesDIAisa“softdiscounter,”meaningitcombinestraditional“harddiscount”elementssuchaslowpricesandsmallstoreswithsofterfeaturessuchasneighborhoodlocations,big-namebrandsandcouponing.Afurthersignofitssofterpositioningisitsembraceofe-commerce,andmanagementpointedtoopportunitiesinthisspace.
DIAexpectstogrowitsonlinesalesbysixtimes,tomorethan€120million,by2020.Wethinkthate-commercecouldbeasignificantcompetitiveadvantageforDIAinaSpanishmarketthatisrelativelyfragmentedandstillinanascentphaseofgrocerye-commercedevelopment.
JuanPedroAgustín,HeadofDigital,notedthatDIA.eshasmorethan90,000customersandthatitseesatypicalbasketsizefivetimeslargerthantheaveragein-storepurchase.HealsosaidthatDIA.eshasacatchmentareathatrepresents60%oftheSpanishpopulation.Additionally,thebrand’snongrocerysite,Oportunidades.DIA.es,attracts135,000customersandoffers5,000SKUsacrossgeneralmerchandise.
DIA’sonlineshoppersareyoungerthanitsin-storeshoppersandrepresent2.25timesthevalueofin-storeshoppers.ManagementalsoemphasizedtheimportanceoftheDIAappfore-commerceaswellasservicessuchasdigitalcoupons.
GuidanceandTargetsDIA’smanagementreiteratedits2017outlookand2016–2018targets:
• For2017,thecompanyexpectsmid-single-digitgrowthintotalsales,adjustedEBITDAgrowthandmarginstability.
• For2016–2018,thecompanyexpectstoseeanorganicsalesCAGRof7%andtotalaccumulatedcashfromoperationsof€750million(thisisadjustedEBITDAlessnonrecurringcashitemslesscapitalexpenditures,onanorganicbasis).
Additionally,ChiefCorporateOfficerAmandoSánchezFalcónnotedthat,between2017and2020,thecompanyexpectscapitalexpendituretobe3.5%–4.0%ofsales,revertingfromhigherlevelsfollowing“anintenseperiodofacquisitions.”
DIAfinancialoutlookSource:DIA2017CapitalMarketsDaypresentation
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June23,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst
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