Lidl Invests For Long-Term

Bleak Even For Discounters
Greece Real GDP and Private Final Consumption Growth (% chg y-o-y)

Discount retail major Lidl has further committed itself to the Greek market with the announcement of a EUR100mn new store opening, store refurbishment and promotional plan over the next three years. The retailer has not put a number on its store opening target, but it will be adding to the 200 stores already operated by Greek subsidiary Lidl Hellas . The timing of the investment, against a backdrop of a severe economic slowdown amid fierce austerity measures, is unusual. However, it cements the firm ' s commitment to establishing itself as a key player within a sector of the Greek retail market which could actually show some prom ise beyond the current downturn.

Even discounting, which offers far greater insulation from periods of economic weakness relative to the wider market, owing to its focus on competitive pricing, is forecast to suffer from weak growth over BMI ' s five-year forecast period, such is the severity of demand destruction within the Greek economy. Despite some potential signs that the pace of economic contraction in Greece could finally start to ease, the depression is far from coming to an end. Latest figures show that industrial production, in particular, has been a heavy casualty of fiscal cut backs, dwindling investment and depressed consumer demand. This has left the outlook for the retail sector, including the discount sector, looking bleak as household wealth, incomes and employment prospects remain in the doldrums.

Nonetheless, beyond the currently entrenched recession, Greece's discount retail sector should be an early beneficiary of the country's return to growth, with the tentative nature of any return of consumer confidence likely to favour low-price hard discounters over the more innovative retail offerings that captured the bulk of growth in the run up to the country's downturn. This should ultimately be to Lidl's benefit, even if the initial focus of its investment strategy may need to be on competitive promotional pricing initiatives rather than aggressive expansion.

This article is tagged to:
Sector: Food & Drink
Geography: Greece

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