Mercator revenue slumps in H1 2017, but improves profit

Date : 07 September 2017

We look at the force behind latest results from Mercator’s first half of 2017 and the initiatives that will support performance for the remainder of the year.

Mercator disposal prompts revenue decline in H1 2017

In the first half of 2017, Mercator’s year-on-year revenue declined by 7.9%, to reach EUR 1.1bn. This follows the late 2016 disposal of apparel banners, Modiana and Intersport, and store closures in Serbia in compliance with the market regulator's decision. Although like-for-like performance reported a lower decline at 2.4%, and profits almost tripling in the first half of 2017 to reach EUR 10.4mn.

Mercator continues focus on shop experience and location

In the first half of 2017 opened/renovated 22 units in Slovenia, 16 in Serbia, and five in Montenegro. The retailer continues to focus capital expenditure on improving instore shopping experience with modern store designs, alongside good and sufficient locations. Mercator also launched a new communication campaign in early 2017 that highlights the refreshed look of stores, targeting new generations of customers with a rejuvenated brand identity.

Supporting local suppliers to maintain trading confidence

Mercator is actively promoting locally sourced goods with a focus on fresh meat, fruit and vegetables, and dairy products. The campaign, ‘Radi imamo domace’ - ‘We Love Local’, has a dual objective. First to promote local produce, and second to retain confidence from local suppliers in trading with Mercator by developing strategic partnership with cooperatives and small local growers.

Targeted value proposition

Mercator looks to build on its objectives of value proposition via a customer-centric pricing strategy that targets certain shopper demographics. The aim of these promotions is to enable spend from low-income customers. Recent examples such as 10% discount for retirees when shopping on a Thursday, or deferred payment of shopping at 0% interest for loyalty card holders.

Mercator return to Bosnia-Herzegovina confirmed

Mercator’s return into Bosnia-Herzegovina was confirmed by Mercator’s parent company, Agrokor, and given the go-ahead by the creditors. As part of debt repayment Agrokor will transform the claims they have towards Konzum BiH in the amount of €34.6 million into ownership of Konzum shares. Stores owned by Mercator before the Agrokor acquisition in 2014 will no longer be leased to Konzum, and will operate under the Mercator banner instead of Konzum.

 

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Amin Alkhatib, Retail Analyst CEE, IGD International: based in London, UK, Amin is responsible for shaping IGD's research in Central and Eastern Europe; as well as contributing to IGD's broader European research programme. Follow me on Twitter @Amin_IGD for further insight on the region’s retail landscape.