Monday , October 25 2021

Grupo Rey, the gondola monarch of Panama


By Daniel Zueras and Luis Sierra,

In a highly competitive retail store in Panama, Grupo Rey won the crown indisputable. More than 50% of the sector's sales (over $ 8,000 million) take place on informal or semi-formal surfaces, totaling more than 15,000 units.

After a 2017 complex that added $ 21.5 million in losses as a group – affected by a new computer system, non-recurring expenses and accounting adjustments – Rey Holdings returns recovered in the first two quarters of the fiscal year. With 77 stores in four different formats, Rey has over 5,500 employees. The 2017-2018 plan meant opening seven of the ten planned stores and investing $ 45 million in the $ 60 million budget.

Read more: Grupo Rey is sold to an Ecuador company

Panamanian retail giant, Grupo Rey, was born 60 years ago. In 1958, although its origin dates back to 1911, it has since rained a lot. Rey Holdings Corp. includes the company Inmobiliaria Don Antonio (IDA, the company covering the whole operation and the real estate branch mainly dedicated to Rey stores), Setrey (internal security company) and Agroindustrial Rey.

Agroindustrial Rey has become a key actor because it supplies the whole group with fresh produce, selling it for about $ 70 million. Produces industrial production of meat, bakery, confectionery and storage of fruits and vegetables.

2017 was a tricky year, with a 13% drop in sales (which reached $ 620 million) at the end of the fiscal year until September last year.
Grupo Rey boasts to be distinguished by a very high quality fresh produce. His repertoire is Supermercados Rey, which in 2017 concentrated 73% of conglomerate sales (440 million USD); followed by Romero Supermarkets, 15% ($ 97 million), Metro Plus, 7% ($ 46 million); and Mr. Price, 5% ($ 36 million).

A number of factors prompted Grupo Rey in 2017. "To define it, it was a year of increasing pain in which there were several important events," explains Hernán Muntaner, Group CEO for a Year . Exactly one of those facts that indicates that this Argentine comes directly from the Walmart regional operation is the managerial transition (the high management has been incorporated in the last year). His historic CEO, Nicholas Psychoyos, has decided to leave the company behind the family.

The second factor is that, just a few months before, at the beginning of the fiscal year 2017 (October 2016), the system was transformed into a new modern computer system, but with a flawed implementation "that lasted a few months. It has brought us many supply problems and for more than six months we have had serious problems of losing sales ", says Muntaner. This convulsion by changing the system has caused a loss of competitiveness. "This means we no longer offer, we no longer make promotions and this is the Panamanian customer who likes to save money and likes to participate in these promotions, We created the impact of a loss of sales of $ 80 million – in the retail area – compared to the same period of the previous year ", explains the CEO.

Screenshot 2018-11-07 la (14.1) (800x600)

In addition, it has been a year of high investment, more than $ 45 million in seven new stores, representing 16% more sales. Nearly half of the investments were made by a single store, the largest in the Costa del Este, which amounts to over 22 million dollars.

Thus, the biennial plan 2017-18 is partially executed, very advanced. The target was 10 new units. The remaining three years for the rest of the year are a Rey store, a D-Price pharmacy and a Metro pharmacy. "With this we could conclude that $ 60 million is planning and contracting more than 500 employees," the executive said.
Speaking for the past 5 years, Grupo Rey has invested over 200 million dollars in new stores and distribution centers. Between this investment was made a bet for the agricultural part with a new meat unit and a fruit and vegetable storage and distribution center.

In November 2017, Fitch ratings downgraded Rey Holdings Corp. and Subsidiaries (Rey) and Inmobiliaria Don Antonio, S.A. and affiliates (IDA) to "AA- (bread)" from "AA (Bread)". The rating outlook is stable; as well as IDA's rating to "AA (bread)" from "AA + (bread)".
The decline in ratings was due to a deterioration in the financial profile below Fitch's expectations, affected by the reduction in sales, which resulted in lower cash flow and profitability.
But the first quarter of the fiscal year 2018 (from October to December) saw a strong recovery in both sales (15%) and net profit (28%). Sales in those months amounted to $ 186.6 million. From January to March 2018, they were also good, not the same as in the previous quarter, as they rose to $ 165.5 million, but higher than any of the four 2017 periods.

Grupo Rey-Panama-DSC_5173 (800 x 600)

Muntaner is optimistic about recovery, as figures show. At the end of 2017 (the first quarter of fiscal year 2018), the group increased to 13% in October, 21% in November and 14% in December, on a market with only 1% growth.
"This growth over the market has led us to recover much of the lost market share in recent months," says the executive director.
The 15% mentioned above are well above the historical average. "If we go back for years, we find it hard to see increases in this order, but we think it has to do with this recovery of lost sales in previous years," he explains, who is convinced that 2018 will be a " Very good for the whole group ", and recovery of the market share, said in May at E & N.
"We are a food company and as long as there is a possibility to continue opening stores offering this type of product, which will be the focus of our attention," says Muntaner.

The conglomerate executive explains that if Panamanian demand requires a different format to offer its expertise, perishable products will evaluate it, but in the short term, "I think they will see more stores of formats that we have, but there is such a drastic innovation in new business. "
As part of his strategy, Grupo Rey has made a firm commitment to his own products, "perhaps we have overcome overexposure to the same," says the CEO, who in any case says not all will disappear, they will preserve.

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