Economy 5 June 2023, 10:15am

Auchan Hungary plunges deep into the red in 2022

Portfolio

Among the large retail chains that have recently published their annual earnings reports, Auchan Hungary's revenue also fell in nominal terms, meaning that sales volumes could have fallen significantly in the face of average food inflation of 26%. This is also confirmed by the decrease in the purchase value of goods sold. The company made a substantial loss in 2022.

Auchan Hungary's revenue fell by HUF 280 million to HUF 354.1 billion, which may not seem like much, but with food inflation at 26%, it shows a serious volume contraction.

In its report, the company explains that part of the reason for the decline in sales is that from the second half of 2021 fuel sales have been removed from their scope of activity.

Portfolio asked the company how much this amount was, i.e. to what extent it could have affected the profit and loss statement, and Auchan gave an evasive answer.

The decline in volume is supported by the fact that the value of purchases of the largest cost item, goods sold, also fell, by 3.4% to HUF 250.5 billion. The fact that this is a greater decline than at Auchan's annual revenue may also mean that the company tried to reduce its losses somewhat by widening margins. However, the difference between the two is small, only 3.3 percentage points, so there is no serious reshuffling of the cost structure.

The company's material costs have almost doubled, with a significant role played by rising electricity prices, which the company spent HUF 7.1 billion on last year, compared to HUF 3.4 billion in the previous year.

The amount of services used rose by only 6.7% last year, including advertising, rentals, security guard services and personnel placement.

Key figures of the company (billion HUF)
	2021	2022	változás
Net sales	354.4	354.1	-0.1%
Purchase value of goods sold	259.3	250.5	-3.4%
Personnel expenses	31.9	32.7	2.5%
Services required	23.9	25.5	6.7%
After-tax profit	8.1	-1.8	-122.2%
Source: company report

Personnel costs did not increase much either, by only 2.5%, but this is not because the company did not raise salaries, but because the number of manual workers fell to 4,380 last year from 4,850 in 2021. The number of white-collar employees rose by just 10 to 1,435.

The wage bill shows that

the gross wage of an average manual worker increased by 16.4% yr/yr to HUF 335,000 gross, which is HUF 223,000 net without benefits.

the earnings of white-collar workers increased by 11.1% to HUF 617,000, which is HUF 411,000 net.

Auchan Hungary ended last year with a loss of HUF 1.8 billion, a balance sheet deterioration of almost HUF 10 billion compared to a profit of HUF 8.1 billion in 2021.

By now, large food retailers have submitted their annual earnings reports, which typically show deteriorating operating conditions. In addition to Auchan, Penny and Spar have also incurred losses, but the former belongs to the discount segment and can be considered one of the winners in this situation. This also applies to Aldi, whose sales managed to grow above food inflation.