Discount chains are popular during times of crisis

Danske Invest Europe Focus is currently invested in four discount chains: Fielmann, Inditex, DIA and Jeronimo Martins, which are all capable of providing good products at reasonable prices for their clients.

”A common feature of the chains is that they all pursue a strategy based on a strong and well-known concept. Their business models are solid, and in step with the economic crisis in Europe directing clients’ focus even more towards prices, the chains will grow  even stronger,” says Henrik Husted Knudsen at Danske Capital, Danske Invest's portfolio adviser on Danske Invest Europe Focus.

Germans fancy discount eyeglasses
Fielmann is the largest chain of optical stores in the German-speaking countries in which the company has 655 stores and accounts for 50% of the sales of eyeglasses in Germany. On average, the Germans are paying DKK 1,300.00 for a pair of glasses from Fielmann, while its competitors are almost tripling this price.

”Fielmann’s competitors are generally small chains or privately owned shops that are selling two pairs of glasses on average per day. By comparison, Fielmann is selling 35 pairs of glasses per day in each of its shops – indeed, a very good business,” states Henrik Husted Knudsen.

Discount chains are expanding their businesses to Brazil and Turkey
The Portuguese super market chain Jeronimo Martin’s most important discount chain is the Polish Polisk Biedronka. Both the Polisk Biendronka and the Spanish discount chain DIA, whose Danish counterpart would be Netto, are focusing on being close to the client and on having streamlined logistics. This is rendering it possible for them to sell their products at a price which is 5-8% lower than that of other supermarkets.

”DIA has a strong market position in Spain, and considering the present crisis there, we believe that DIA has a highly favourable position in the market,” says Henrik Husted Knudsen.

The money that DIA is making in Spain is invested in Brazil and Turkey where the company is opening new stores. Today the two countries are only making small contributions to total earnings, since the opening of new stores and the establishment of the logistic setup involve high costs. When DIA's business in Brazil and Turkey become larger, its earnings there are likely to be substantial, Henrik Husted Knudsen believes.

The discount chains in Danske Invest Europe Focus account for:
Inditex : 4.45%.
DIA (Distribuidora Internacional De Alimentacion SA): 3.38%.
Jeronimo Martins: 2.15%.
Fielmann: 1.86%.