Despite the downturn facing the once booming Baltic Tiger States, sales at Maxima were up 31.4% to LTL4.79 billion (E1.38 billion) for the first six months of 2008. The outlook remains positive for Maxima, as sales are being boosted by price conscious consumers' attraction to its stores. Meanwhile, expansion in Bulgaria could provide a significant growth opportunity for Maxima outside the Baltics.
Maxima is the leading grocer in the Baltic states, with 424 stores in the region. The retailer has a particularly strong presence in the largest of the Baltic countries, Lithuania, where it has 229 stores including hypermarkets, supermarkets, neighborhood stores and a cash and carry operation. The grocer's sales in Lithuania were up 31.8% to LTL3.07 billion (E886m), following a particularly strong first quarter of 35.3% year-on-year growth.
Sales in Latvia were up 24.1% to LTL1.16 billion (E334.8m), where the company operates 123 stores. It was in Estonia, however, where Maxima saw its strongest performance, with sales up 50.5% to LTL454m (E131m). While its Estonian operations remain relatively small (49 stores as at June 2008), the company continues to expand its network in the country, closing the gap on Estonia's leading players, ETK and Rimi Baltic.
Maxima has reported two solid quarters of strong sales growth, despite the growing consumer downturn that is affecting other retailers in the Baltics. While electricals, DIY and furniture retailers are experiencing a decline in sales as soaring inflation and difficult macroeconomic conditions squeeze disposable incomes, Maxima, the region's largest grocer, appears to be relatively insulated from the problems. Indeed, Maxima's rise in sales can be attributed to a larger number of price conscious consumers shopping at its stores in the quest for low price offers.
The Baltic Tigers face a challenging macroeconomic environment going forward. Soaring inflation and a dormant housing market coupled with the global financial crisis will undermine the countries' GDP growth in the next two years. A sharp readjustment is inline for the overheating economies of the once booming Baltic States.
While Maxima continues to perform strongly amid a downturn in the Baltic States, the company is looking outside the region for growth opportunities by rapidly developing its operations in Bulgaria, where it has a network of 22 neighborhood stores under the banner T-Market. The company plans to open a further 16 outlets by the end of the year. Stores in Bulgaria have been performing strongly, with sales up 66% last year. In the first half of the year, sales reached LTL103m (E29.7m), an increase of 33.9%.
For Maxima, Bulgaria is an ideal market in which to grow its operations, as the grocery market is still developing and is not as highly concentrated as those in the more mature Baltic States. However, as consolidation starts to kick in, Maxima's neighborhood stores could be swallowed up by a larger player in the country, as happened with its supermarket chain in Romania, which was acquired by Belgian retailer Louis Delhaize last year.
At any rate, Maxima's Bulgarian operation is still low key and the Baltics, where it leads both the Latvian and Lithuanian market, remain the company's stronghold. As the economic situation in the Baltic States takes a turn for the worse, Maxima is in a strong position to serve an increasingly cash-strapped consumer base by focusing on a low price offer.
Source: Verdict Research