11.2.2016

Price reductions provided a boost to S Group's grocery trade

Compared to 2014, S Group's operating result improved in 2015 thanks to two years of strict cost control, increased customer volumes and positive trends for the consumer goods trade. The price reductions resulted in increased sales volumes and S Group's grocery trade exceeded overall market development.

S Group's operating result for 2015 was EUR 265 million (EUR 226 million in 2014). SOK Corporation's operating result was EUR 17 million (slightly less than EUR 8 million the previous year).

The cost savings achieved through the efficiency programmes launched in 2014 have made it possible to lower prices for groceries. Introduced more than a year ago, the lower price policy has considerably increased S Group's customer and sales volumes. Strict cost control and increased volumes were sufficient to maintain roughly the same result as before for S Group's domestic grocery trade.

Taavi Heikkilä, CEO of SOK, emphasises that the price reductions represent a long-term strategic change that will, without compromise, be completed in line with the cooperative principle.

"Our customer volumes have increased, which means that, with the lower price policy, we have been able to give more benefits to our customers. We have seen a significant increase of volumes and won a greater share of the grocery trade market. Moreover, the lower prices have enabled us to sell millions of kilos more of Finnish products," says Heikkilä.

Mr Heikkilä also reveals that the savings and the good result make it possible to carry on with the price policy and benefit S Group's customers with approximately EUR 50 million this year. About a month ago, the third wave of the policy was launched with price reductions for healthy and light favourite products. The third wave has been well received by the customers.

Other markets also show a positive flow

In addition to increasing customer volumes and cost reductions, S Group's result was boosted by the positive result development trends in the grocery trade. The profit improvement exceeded EUR 30 million, despite the operating environment which has been challenging for the grocery trade for a number of years. The department store trade in particular has had positive business development. Others, such as our travel and restaurant business and ABC-chain, have also benefited from streamlining their concepts.  

For the whole S Group, the expected result for this year is slightly lower than in 2015 following from the lower price policy. SOK Corporation's operating result is expected to improve slightly from the figures for 2015.

The Finnish Commerce Federation forecasts feeble growth for the trade industry for this year and 2017. Therefore, Mr Heikkilä's message to decision-makers is that they ought not to weaken consumers' purchasing power with measures like raising taxes.

 "Raising VAT is not an option at this stage because it would hit low-income consumers particularly hard. The Government has to stay on the path of deregulation. The free opening hours that came into effect on 1 January were good news for the industry."

At the end of 2015, S Group had a total of 1,632 outlets. The number decreased by ten from the previous year.

 

Summary:

S Group's sales and economic development in January–December 2015

S Group as a whole

·         S Group's retail sales excluding taxes totalled EUR 10,804 million in 2015 (EUR 11,182 million in 2014).

·         Its retail sales decreased by 3.4 percent.

·         The grocery trade sales in Finland decreased by 0.3 per cent.

·         S Group's (cooperatives + SOK Corporation) result before extraordinary items and taxes was EUR 304 million (EUR 274 million).

·         S Group's operating result was EUR 265 million (EUR 226 million).

·         Investments totalled EUR 559 million (EUR 528 million).

·         At the end of 2015, the number of personnel was 37,758 (40,292 in 2014). In 2016, S Group will employ a total of around 13,000 summer employees and summer trainees through the Learn and Earn programme.

·         The total number of outlets on 31 December 2015 was 1,643 (1,642 in 2014).

SOK Corporation (SOK + subsidiaries)

·         Revenue from continuing operations was EUR 7,038 million (EUR 7,286 million in 2014).

·         Net sales decreased by 3.4 per cent.

·         SOK Corporation's result from continuing operations before taxes was EUR 9 million (EUR 40 million).

·         SOK Corporation's operating result was EUR 17 million (EUR 8 million).

·         Investments totalled EUR 48 million (EUR 69 million).

·         At the end of June, SOK Corporation's number of personnel was 7,778 (8,232).

 

S Group's retail sales excluding taxes, Jan–Dec 2015

Supermarket trade* EUR 7,479.4 million (-1.8%)

Hardware trade EUR 184.4 million (-9.3%)

Service station store and fuel sales EUR 1,608.5 million (-9.1%)

Department stores and speciality stores EUR 294.5 million (-9.0%)

Travel industry and hospitality business* EUR 801.6 million (+0.4%)

Automotive trade and accessories EUR 309.3 million (+2.6%)

Agricultural trade EUR 111.6 million (-27.4%)

Other EUR 14.9 million (+7.4%)

S Group total EUR 10,804.2 million (-3.4%)

* Includes retail sales in the neighbouring regions (the Baltic countries and St Petersburg).

Supermarket trade

In 2015, the retail sales of S Group's supermarket trade totalled EUR 7,479 million. This includes the grocery and consumer goods sales of the Prisma, S-Market, Sale and Alepa stores, as well as other supermarket trade units in Finland and neighbouring areas. Sales decreased by 1.8 percent year-on-year.

S Group's total grocery sales in Finland decreased by only 0.3 per cent to EUR 6,528 million. Sales increased far more than the market in general. Following the low price policy, the supermarket chains have seen a significant increase in sales and customer volumes. The consumer goods trade sales decreased by 6.9 per cent in Finland year-on-year, totalling EUR 1,184 million.

From the end of 2014, the number of supermarket trade outlets increased by 11, totalling 930 at the end of 2015.

S Group's hardware trade includes the Kodin Terra and S-Rauta chains. In 2015, the retail sales of S Group's hardware trade totalled EUR 184 million. In a difficult market situation, sales decreased by 9.3 per cent compared to the previous year. With regard to S-Rauta, the sales include the retail sales of agricultural outlets. At the end of 2015, the number of hardware trade outlets was 23, which is one less than at the end of 2014.

Service station store and fuel sales

S Group's service station store and fuel sales are managed by the ABC service station chain. Service station store and fuel sales decreased by 9.1 per cent in 2015. The decrease was mainly a result of the continued decrease in the world market prices of fuels. At the end of the year, the number of ABC outlets was 236 (444 including all of S Group's distribution outlets).

Department store and speciality store trade

The retail sales of S Group's department stores and speciality stores decreased by 9.0 per cent. At the end of 2015, the number of Sokos stores was 19 (including the online store), the number of Emotion stores was 34, and the number of Marks & Spencer stores was six.

Travel industry and hospitality business

The travel industry and hospitality business chains include Sokos Hotels, Radisson Blu Hotels and several restaurant chains. Retail sales in the business area increased by 0.4 per cent and stood at EUR 802 million.

At the end of 2015, there were 62 hotels and 239 restaurant outlets. The total number of restaurant outlets was 736, including units located in connection with other outlets.

Neighbouring areas (Baltic countries and St Petersburg)

The retail sales of the business operations in Finland's neighbouring countries totalled EUR 489 million, representing a decrease of 16.0 per cent year-on-year. Sales decreased, particularly in St Petersburg, as a result of the weaker Russian rouble.

Banking

S-Bank Group's operating result in 2015 was EUR 16.6 million (EUR 14.6 million in 2014). At the end of the year, S-Bank had more than 2.8 million customers, who were in possession of 1.8 million international debit cards issued by S-Bank. Around 1.6 million customers had acquired IDs for online and mobile banking.

At the end of 2015, S-Bank's total funds on deposit were EUR 4,112 million, and its total lending was EUR 2,831 million.

S-Bank is the only in-store bank in Finland. Its goal is to make the daily use of money easier for customers. This is reflected in the development of digital services in particular. S-mobiili, a mobile app for the customers of S Group's stores and banks, is an excellent example:

Co-op membership

The co-op members, or the members of the cooperatives, are the sole owners of S Group's cooperatives. Co-op membership is S Group's way of conducting its cooperative form of business and producing services and benefits for its co-op members.

The growth in the number of co-op members continued. In 2015, a total of 91,566 new members joined the cooperatives participating in the bonus system. At the end of the year, the total number of co-op members stood at 2,225,506.

SOK Corporation's financial statements for 2015 can be found online at www.s-kanava.fi.

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