Swiss retailers’ profits rise despite price war

Migros' profits still rose despite the pressure on prices Keystone

Switzerland's two biggest retailers, Migros and Coop, have managed to increase their profits even though their sales figures rose less significantly last year.

The two groups have been forced to deal with the arrival of foreign discounters, dropping the prices on their products and trying to consolidate their market share.

Migros, the country’s top retailer announced on Wednesday that its profits grew 7.9 per cent in 2006 to SFr754 million ($626.6 million). Sales were again above the SFr20 billion mark, increasing by 1.3 per cent.

These encouraging results are less rosy when compared with those of rival Coop.

The number two announced last month that its sales had increased by 4.7 per cent, reaching SFr15.6 billion, while profits grew by almost 15 per cent to SFr310 million.

Both groups continued to cut prices last year, although neither expects to reach the same level as the foreign discounters, according to the Swiss economics ministry.

Migros’ fell by one per cent on average, while those of Coop dropped 1.8 per cent. The Swiss inflation rate was 1.1 per cent in 2006.

Besides cutting prices on some products, Migros extended its M-Budget low price range and cut its workforce by 2.2 per cent.

Coop, which cut the number of its employees in 2004 and 2005, said all its divisions had contributed to the increase in sales, and that productivity had grown “strongly”.

Items such as the Fine Food and Weight Watchers ranges saw double-digit growth last year, while sales of organic Naturaplan products were worth SFr1.12 billion to Coop.

Neck and neck

The two groups are neck and neck when it comes to market share.

Migros has 24.1 per cent of the food sector, versus 21 per cent for its rival. But Coop comes out on top for non-food products, with a 10.3 per cent share, nearly one per cent ahead of Migros.

Earlier this year Migros purchased a majority stake in the country’s third largest food chain Denner.

The head of the number one retailer, Herbert Bolliger, expects pressure to be maintained on prices this year, with only minimal sales growth. But profits should remain at current levels.

Coop says it is confident for 2007, which got off to a good start. By the end of February, sales had increased by four cent over the same period last year.

swissinfo with agencies

Key facts

Migros 2006:
Net profit: SFr754 million (+7.9%)
Sales: SFr20.7 billion (+1.3%)
Workforce: 79,194 (-2.2%)

Coop 2006:
Net profit: SFr310 million (+14.8%)
Sales: SFr15.6 billion (+4.7%)
Workforce: 45,484 (+1.3%)

Migros and Coop

Migros is a cooperative society with ten regional sections. Around 2 million people are members of the cooperative, effectively making it a supermarket chain owned by its customers.

It sells no alcohol or cigarettes, but some of the retailers acquired or set up by Migros continue to provide these products, including Globus, Migrol and Denner stores, as well as the online shopping service LeShop.

Coop is also a cooperative society, divided into five regions, with approximately the same number of members as Migros. Like its rival, it sells a mix of brand names and its own products.