11.1Economic and sector backdrop
In general terms, the DIA Group posted a solid and reliable performance in 2015, despite the challenging economic situation in various business markets.
In an environment marked by the gradual rebalancing of China’s economic model, the slowdown in emerging markets and a slight rebound in Europe’s advanced economies, the company once again demonstrated the resilience and success of its profitable growth strategy.
The DIA Group yet again delivered its EBITDA growth guidance and reported double-digit topline growth, underpinned by development of its multi-format model in Spain and Portugal, coupled with significant margin expansion in its emerging markets.
2015 was a challenging year in terms of consumption in Spain and Portugal as a direct result of political and economic uncertainty which dented consumer confidence. Faced with this situation, the DIA Group remained committed to its commercial proposition based on offering the market unbeatable value for money; it leveraged innovation, new products and new formats to consolidate its position as one of the leading players in the retail sector, with a market share in Spain and Portugal of 10.31% and 8.65%, respectively, according to Nielsen. These figures marked a substantial 63 basis point increase in Spain year-on-year albeit a slight decline in the case of the Portuguese market.
The International Monetary Fund has revised its growth forecasts for the next two years upwards, considerably so in the case of Spain for which it is now forecasting GDP growth of 2.7% in 2016. The economic firming is tangible in the recovery sustained by the company in its same-store sales in its Iberia business segment during the last quarter of the year (+0.2%), putting an end to the downtrend in this metric.
In the Emerging Markets segment (Brazil, Argentina and China), the company´s performance was healthy in general terms, despite adverse economic circumstances in all three markets. Although the Brazilian economy contracted by 3.8% in 2015, the DIA Group stuck unwaveringly to its profitable growth strategy, opening more stores in this market last year than ever before and lifting its market share to 7.15%, up 30 basis points year-on-year, according to Nielsen.
A new government took office in Argentina in the wake of years of currency depreciation and protectionist policies devised to control prices. Inflation remains one of this economy’s biggest challenges, topping 20% at year-end 2015, with inevitable effects on private consumption. Nevertheless, the economic indicators suggest that the pace of economic contraction hit bottom towards the end of 2014 and that optimism is slowly returning.
Against this backdrop, the DIA Group remained strategically committed to its neighbourhood shopping model, investing in prices and growth through its master franchise agreements, which enabled it to boost its market share by 54 basis points to 12.59%.
The Chinese economy, meanwhile, registered growth of 6.9%, down 0.4% from 2014 and in line with official forecasts. Chinese exports fell while the services sector grew, evidencing the shift towards growth led by internal demand.
Chinese consumers are increasingly moving online, a trend the DIA Group is tapping with new projects, notable among which the rollout of its e-commerce platform in Shanghai and an agreement to sell products on Alibaba’s T-Mall platform.
At year-end 2015, the company’s market share in Shanghai had increased by 12 basis points to 2.56%.