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Retail

Credit Quality For Benelux Retailers Set To Erode, However Food Outlook Positive: Moody's

By Steve Wynne-Jones
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Credit Quality For Benelux Retailers Set To Erode, However Food Outlook Positive: Moody's

Moody's has sad that the overall credit quality for retailers operating in the Benelux region could erode over the next 12 to 18 months, as slowing growth and rising competition start to bite.

According to a Moody's Investors Service report, softer macroeconomic conditions in Belgium, the Netherlands and Luxembourg looks set to curb consumer confidence, while faster growth within the online channels is likely influence shopper behaviour.

Market Performance

According to Moody's, Benelux retail saw a compound annual growth rate of 1.6% between 2013 and 2018, which will drop back to 1.0% between 2018 and 2020.

Food retail, on the other hand, will see an accelerated performance – food retail in the Benelux region posted a CAGR of 1.1% between 2013 and 2018, and will see growth of 1.5% between 2018 and 2020.

Food retailers' fortunes are likely to depend on market conditions and formats exposure, however, with Aldi and Lidl's above average growth likely to continue to eat into the market share of the established players, said Moody's.

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For Ahold Delhaize, Moody's expects 'continued single-digit percent sales growth' during the period, which will help it maintain its market share and profitability, despite growing competition. Colruyt, too, is likely to put in a solid performance in the Belgian market.

Carrefour, however, is likely to find the going tougher, with Moody's saying that the retail giant's Benelux operations 'will struggle to generate positive free cash flow in the next 12-18 months'.

'While we expect Colruyt's and Ahold's market shares to erode slightly, this will not materially weaken their credit quality,' Moody's said. 'The two companies are the leaders in their respective home markets of Belgium and the Netherlands, with market shares of 10.7% and 21.2%, respectively, in 2018.

'Both companies will continue to benefit from their economies of scale and their well developed online offers. Both companies also have strong budget private label alternatives to Aldi and Lidl products, which will remain popular with lower income customers.'

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Online Presence

Online players may continue to erode the market share of major grocers – as Moody's noted, in Belgium, Colruyt, Delhaize and Carrefour are losing share in online grocery to pure player Picnic.

Online retailers pose less of a competitive risk to the discounters, Moody's said, 'because of the already low prices of their products and the fact that delivery costs of online shopping would be disproportionately large versus the cost of the basket of goods'.

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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