Colombia’s largest retailer, Almacenes Exito SA, expects strong domestic consumption and retail sales to continue this year, its chief operating officer Carlos Giraldo said Wednesday.
“We are positive toward consumer consumption,” he said, adding that Colombia’s economy is expected to grow in the area of 4.5% this year. Almacenes Exito expects to release its 2010 fourth-quarter results next week.
Giraldo added that the surge of Colombia’s middle class is an important indicator for the retail industry’s growth.
To take advantage of the diversifying economic brackets, Exito will have capital expenditures in the area of $160 million, Giraldo said. Its investments will be largely devoted to expanding its multiple store formats within Colombia, including discount stores and also convenience stores intended for the “congested, jammed Colombian cities like Bogota,” he said.
The smaller stores are part of an effort to tap into the country’s informal food market, which is worth around 17 billion Colombian pesos ($8.9 million), he added.
The company will remain focused on the Colombian retail market, particularly by extending its current store models into medium-size Colombian cities, he said.
Other important opportunities for the retailer include demand for nonfood items, such as home products, appliances and electronic devices, Giraldo said.
Though emerging markets have been overtaken by concerns about increasing global inflation, Colombia’s inflation is under control and is not a substantial concern for the retailer, Giraldo said.
Consumer prices in Colombia rose 0.91% in January after seeing months of torrential rains, which damaged farm crops and caused a supply shock that led to an increase in food prices.
“We have had a short-term effect from food inflation given the problems we had with the excess in rains in the last months, but we think that will be coming down in the coming months,” he said, adding that the production of fresh goods should also normalize.
In addition, he said that the appreciation of Colombia’s peso over the past year is not a “relevant” concern for Almacenes Exito, given the fact that the company has a small amount of debt, which is covered.
“Obviously it comes in line with globalization and with the need that we have to have the right mix between national products and imported products,” he said.
The peso has stabilized this year, helped by central bank intervention in the form of daily dollar purchases of $20 million. Even if the bank stops intervening and the peso returns to stronger levels, “it is not going to have an effect on Colombia’s purchasing power,” he said.
About 90% of the retail giant’s purchases are done domestically and a high percentage of them will be done in pesos, he added.
