Dia has presented the worst results in its history, which have placed the supermarket chain in a situation of technical bankruptcy. However, assisted by the bank, which guarantees liquidity for the time being, can and will continue to operate. And its dome has presented this Friday a new strategic plan to get the company out of the quagmire. This plan fundamentally involves a new commercial offer -with more and better fresh products and a review of prices and assortment-, a greater commitment to proximity and convenience, closing of stores, a revision of the franchise model (60% of establishments) and operational improvements to save costs. With this plan they expect to raise sales by 5% on average each year until 2023 and improve EBITDA from 2020.
The CEO, Borja de la Cierva, along with the financial director, Enrique Weickert, and the person in charge of transformation, María Miralles, have explained in a conference with analysts the plans of the dome, approved by the board of directors, to revive the deal. These plans are subject to the support of the shareholders, who will have to choose next month between the roadmap of the current directors, which includes the new strategic plan and a capital increase of 600 million to clean up the accounts, and that of the maximum shareholder, the Letterone fund of the Russian tycoon Mikhail Fridman, who owns 29.1% of the capital, and has submitted an OPA for the rest. If successful, it would expand capital by 500 million and launch a six-pillar plan similar to that presented today by De la Cierva.
For the moment, the council's plans have the support of the bank, which has guaranteed liquidity as long as the capital increase is carried out. So he keeps his road map, supported by the rescue plan. This is based on four axes: commercial offer, new formats, new franchise model and better management.
Fresher, less price
The new commercial offer translates into a reinforcement of the fresh area, which, as De la Cierva has pointed out, should help increase the frequency of visits by customers; a bet more decided by the white mark, elevating his quality and innovation; a new approach to prices, with reduction in general and fewer promotions, but more personalized using the data collected from customers; reduction of the assortment focusing more on the new consumption habits, and, finally, new services in store to improve the customer experience.
The plan also includes a new approach to the store park. The chain has been reducing its store park, especially in Spain, in recent years and "are being studied" new closures of unprofitable premises. In the rest, new services related to the new trends will be introduced: unattended boxes, store collection and delivery at home. In addition, they will be remodeled to renew their appearance and to adapt them to new formats, such as Dia & Go, convenience stores with ample hours, consumption zone and take-away dishes, which, according to the chain, grow 27% in sales and whose Margins have improved by 28%. However, as announced by De la Cierva, the investment for 2019, a year of transition, will be "much smaller" than in 2018 to return to assume between 3 and 4% of revenues from 2020.
As for the franchises, a model that accounts for more than half of the chain's stores -40% in Spain- and that has given it some problems, Dia plans to revise the number -recovering some- and renew the relationship with its franchisees, with new incentives, training plans and tougher entry standards.
Finally, it includes a review of the processes to be more efficient, which includes from the new store formats to the renewal of computer systems, through a reduction in operational complexity or a remodeling of the supply chain. In this last aspect, a renegotiation with suppliers and a new logistics and storage model focused on home delivery are foreseen.
The plan starts from the basis that Dia, which was born in 1979 with a supermarket in Madrid, "lost focus on performance" in 2016 after a few years of unbridled expansion between 2011, when it went public, and 2015. In that period , the park of stores, the comparable income and profitability, but also the level of debt increased strongly. But those numbers went from 2016, with revenue falls of up to 5% and margins reduced while the debt more than doubled. Particularly in the last two years, he points out that, in addition to the great competition in Spain and Portugal and the currency crisis in Brazil and Argentina, he was more concerned with margins than with the client, with no attention to the franchisee and a strategy dispersed in terms of formats.