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Article Excerpt
OPERATOR: Good morning, my name is Marcello and I will be your conference operator today.
At this time, I'd like to welcome everyone to the Almacenes Exito fourth quarter conference call. (Operator Instructions). After the speaker's remarks there will be a question and answer session.
Thank you for your attention, Ms. Carolina Escobar you may begin your conference.
CAROLINA ESCOBAR, IR MANAGER, ALMACENES EXITO SA: Thank you Marcello, a very good morning to you all and those of you who are in Europe, a very good afternoon. My name is Carolina Escobar, Investor Relations Manager for Almacenes Exito, and I would like you to welcome for our conference call, where we will be presenting our results for the fourth quarter of 2008.
This conference is being transmitted via webcast on our website, where you can also find the presentation. We will also like to inform you that yesterday our fourth quarter report was published on our website, both in English as well as in Spanish.
Should any of you wish to be included on our mailing list and receive our quarterly reports directly from us, please contact me, Carolina Escobar, Investor Relations Manager. My contact information can be found on the website www.exito.com under the investor relations tab.
Some of the figures we present today are purely for forecast figures and should not be construed as any infallible indication of future economic circumstances, market conditions or Company performance. As indicated, all projected figures these are subject to numerous risks and uncertainty. For more detailed information about our fourth quarter results, please refer to our earnings release available at our website.
With us today is Mr. Gonzalo Restrepo, Chief Executive Officer of our Almacenes Exito. Our Chief Financial Officer, Mrs. Edith Maria Hoyos and Mr. Jose Loaiza, our Financial Planning Director.
As with our previous quarterly conference calls, today we will begin with a brief summary of Colombia's macroeconomic results followed by a discussion of our financial and operating performance during the fourth quarter of 2008, together with the more relevant aspects of this year-end result.
As on previous occasions during the presentation you'll be on listen-only access, then we'll move to our Q&A session where we can take all your questions.
And now, I'd like to turn the call over to our CEO, Mr. Gonzalo Restrepo.
GONZALO RESTREPO, CEO, ALMACENES EXITO SA: Thank you Carolina, good morning or good afternoon to you all. First, on behalf of the entire team at Almacenes Exito, I'd like to welcome you to our fourth quarter teleconference and thank you for being here with us today.
Before beginning with this presentation, I'd like to provide you with a little more context by discussing Colombia's macroeconomic performance towards the end of last year, which is illustrated in slide number five.
Although experts have said that the effects of the worldwide crisis tend to be slow to reach American markets, clearly in the case of Columbia, the majority of its macroeconomic indicators are showing a significant decline, especially in the sectors of industry and commerce.
During the third quarter of 2008, the Colombian economy grew at a rate of just 3.1% fuelled by zero growth in the retail sector, compared to 7.5% for the same period in 2007. Based on official fourth quarter projections, some experts now estimate the final year end GDP growth for 2008 closer to 3%.
Analysts have not yet arrived at a consensus regarding the projected GDP growth rate for 2009. However, the Colombian Central Bank is currently estimating an average growth between 1% and 3%, which constitutes a favorable comparison with other countries within the region.
This economic slump has been witnessed by the decline in retail industry. According to DANE, the Colombian Statistics Bureau, retail sales growth in nominal terms dropped from over 12% in November '07 to just 2.9% in the same month in 2008. This is a slowdown of 9.1%.
Experts place this drop in disposable income; even higher inflation in food prices; the credit crunch; the decline in the job market and the deteriorating optimism given the situation prevailing in worldwide markets.
The year end inflation rate reached 7.67% or 198 basis points higher than the 5.7% recorded during the previous year. This increase was mainly due to the 13.7% rise in food prices.
For 2009, the Central Bank is expecting the pace of inflation to slow down to between 4.5% and 5.5% due to lower pressure on demand as a result of the prevailing economic situation and the effect of a reduction of raw material prices.
As a result of macro conditions, Colombian Central Bank review its stance on monetary policy and at the end of 2008 reduced the intervention interest rate by 50 basis points to 9.5%. The Central Bank also set a cap rate limit for the first quarter of 2009 of 3.71% on consumer credit. That is to say 204 basis points below the rate established for the same period in 2008.
In January 2009, the intervention rate was reduced by the Central Bank by an additional 50 basis points to 9% and the market expects the Central Bank to continue reducing interest rates in order to stimulate the Colombian economy.
According to the latest data published by the Colombian Statistics Bureau, DANE, unemployment for the fourth quarter of 2008 came to 10.5% versus the 9.8% recorded for the same period in '07. This resulted in an average annualized rate of 11.3%, which was 30 basis points higher than the average unemployment rate for 2007.
The exchange rate end of the year at COP2,243 per dollar showing a devaluation of the Colombian peso of 11.4% with respect to the year end figure recorded for 2007. This devaluation trend continues in 2009. Yesterday, the exchange rate closed at COP2,596 per dollar. That is to say a year to date 2009 depreciation of 14.65%.
The behavior of mentioned macroeconomic variables reflects the difficulties faced by the consumption and low growth expectations for the Colombian economy. However, as a leading retail chain in the country, we're not going to sit down cross handed, and as it will be detailed later, we'll deploy commercial actions to accompany the consumers in these challenging times.
These actions will include the extension of the private label portfolio; focus on understanding changing consumption partners throughout our loyalty programs; and the fine tuning of our Bodega format among others. These actions will allow us to retain our customer base and detract them from migrating with the informal sector.
On slide number seven, we show the progress made with our expansion plan. During the fourth quarter of the year, the Company opened four new stores; the Exito Zipaquira and Exito Tunal stores, thereby completing a total of 87 Exito hypermarkets nationwide; the Carulla La Visitacion store in Medellin for a total of 94 supermarkets and the Bodega Surtimax Claret completing 14 stores of the new Bodega format.
With these projects, the Company added 11,520 square meters of selling space and completed projected [10] store openings that were scheduled for 2008. And Almacenes Exito ended the year with the total of 264 stores representing a total selling area of almost 647,000 square meters.
The Company also [active] through its store brand a streamlining program, converting five stores, including four Surtimax that were transferred to the Bodega Surtimax format, as well as the Merquefacil store was converted to a Carulla supermarket during the last quarter of the year. With these projects the Company totalized 28 conversions in 2008.
On December, 1 we successfully completed our back office integration program with Carulla Vivero. Throughout this process, a total of 152 stores are now connected up to the Group's systems and to its logistics network.
As a value-oriented retailer, we believe that current market conditions provide an opportunity to make it clear to our customers that Almacenes Exito is going to support them in maintaining their standard of living as close as possible to what it was during better economic times. This is the reason why we continue to...
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