Monday, November 6, 2017

DIA Supermarkets


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DIA is a spanish discount supermarket chain that operates over 7.000 shops all over the world.

As most companies in the brick and mortar retail sector it is facing its own share of problems, such as fierce competition from other discount supermarkets, such as Mercadona, Lidl or Aldi, but also from online shopping giants like Amazon, which is now entering the real state, grocery and maybe even the prescription drug sectors. Such fierce competition cuts down on its great profit margins, which were record in its sector for quite a while.

Indeed, sales fell down by 4% in the first 9 months of 2017 compared to 2016, although in part caused by temporary closures of shops for readjustments. While this number sounds pretty high, experts predict yearly sales to fall only a 0,6% by the end of the year.

Still, this and other data, such as its CEO selling shares for 1.15 million euros, and in total 4 of its top administrators selling worth 1.65 million euros, hasn't helped its stock value.
Since its maximums in July at 6.4 € per share down to as low as 4 € in October, the share has sunk rapidly.

It is not the only company in the sector facing this; Carrefour and Ahold among many others have experienced falls in the first 10 months of 2017, some as high as 20% losses in share prices.

Although I am interested in the sector, being a consistent money earner as everyone has to eat all-year-long, right now it is evolving to a more online-focused business.
Many companies won't be able to adapt and compete, and thus will be left behind, close or be absorved. As such, I avoid every retail company right now, even Dia at such low prices, as I think the sector is in a revolution, and I'm not sure which heads will remain standing by the end of it.

Brothers, best of luck in your investments.

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