Colruyt NV (COLR), Belgium’s biggest discount food retailer, fell the most in almost eight weeks in Brussels trading after forecasting profit growth will stall because consumers are reducing their food purchases.
Colruyt dropped as much as 4.7 percent on Euronext Brussels, the biggest intraday decline since Aug. 1, and traded 1.74 euros lower at 42.31 euros by 9:48 a.m. local time. Almost 70,000 shares changed hands so far, or about 55 percent of the daily average in the past three months.
Net income in the fiscal year ending in March will be little changed from 353.7 million euros ($478.1 million) a year earlier when adjusting for a 15.3 million-euro impairment, Chairman and Chief Executive Officer Jef Colruyt told shareholders late yesterday at the annual meeting in Halle, Belgium. Analysts projected profit of 381.2 million euros, according to the average of 18 estimates compiled by Bloomberg.
Belgian consumers have been reducing food purchases as a proportion of their total spending in recent months, Chief Financial Officer Marc Hofman told investors. He said sales growth at the retailer’s flagship Colruyt stores will be at the low end of a 4 percent to 6 percent range that Colruyt provided to analysts in June. While consumer confidence climbed to the highest level in almost two years in September, it recovered from a four-year low in December and Belgium’s unemployment rate is still rising.
“The current market remains challenging and management explicitly stated that it does not see seemingly better macro indicators in the present performance of its outlets,” Hans D’Haese, an analyst at Banque Degroof in Brussels, wrote in an investor note. D’Haese said he slightly trimmed his estimate for net income to 373 million euros because Colruyt management is usually rather cautious.
Colruyt’s fiscal first-quarter sales of 2.11 billion euros missed analyst estimates as revenue growth in its retail division slowed to 3.4 percent from 5.6 percent in the preceding quarter, while Belgian food inflation accelerated during the period. Hofman said yesterday internal inflation in Colruyt’s stores is “significantly below” the 4.7 percent annual increase in Belgian food prices as consumers buy more lower-priced items and Colruyt maintains its strategy of offering the lowest prices among Belgian supermarkets.
“Given that sales growth will probably land at 4 percent, while inflation is higher than expected, like-for-like volumes are probably flattish,” Pascale Weber, an analyst at KBC Securities NV in Brussels, wrote in a note today. “Colruyt continues to gain market share, but the pace is slowing down.”
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