Skip to main content
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

Portuguese Retailer Expands Abroad Without Breaking the Bank

Sonae has expanded to 17 new markets in 2016 and now operates in 89 countries, generating sales of more than €600 million abroad.
By
  • Bloomberg

LISBON, Portugal —  Sonae SGPS SA, Portugal's biggest hypermarket and supermarket chain, wants to show that a retailer from a modestly sized market can expand overseas without deploying shopping carts full of cash.

The company this month expanded its presence across the Iberian peninsula by combining its sports retail arm with the regional unit of JD Sports Fashion Plc of the UK. The deal gives Sonae a boost in Spain, where its sporting-goods business struggled with a lack of scale that has weighed on the company’s share price.

It was the latest in a series of moves by Sonae, based in the northern Portuguese city of Maia, to bolster its overseas operations through partnerships in order to avoid capital-intensive investments in its own stores and limit financial risk. Sonae expanded to 17 new markets in 2016 and now operates in 89 countries, generating sales of more than €600 million ($647 million) abroad.

“We knew we wouldn’t be able to do it alone,” chairman and co-chief executive officer Paulo Azevedo said on the sidelines of an earnings presentation this month, dressed in his own brands’ clothing and sneakers made from Portuguese cork and wool. “We want to grow. We’re not looking at other markets simply to replace Portugal.”

ADVERTISEMENT

Mozambique, UAE

Last year, Sonae agreed to buy a 50 percent stake in Portuguese clothing company IVN-Servicos Partilhados SA, also known as Salsa, to bolster its non-food retail business abroad, expanding in Spain, France and Italy. It also partnered with billionaire Mohamed Ibrahim’s Satya Capital LLP to acquire two food retail stores in Mozambique and agreed to start a supermarket chain with Fathima Group in the United Arab Emirates.

Even while expanding, Sonae has reduced net debt to €1.2 billion last year from €1.3 billion a year earlier. Its shares have fallen about 17 percent over the past 12 months as investors focus on tight margins in its domestic food business and telecommunications operations, though they’ve bounced back from lows last summer.

The JD venture, in which Sonae is keeping only 30 percent, creates the second-largest player in sports retail in the Iberian Peninsula after Decathlon SA, with 287 stores in Portugal and Spain, the companies say. It “shows that Sonae is willing to take more decisive actions to turn around its non-food business,” Haitong Research analysts including Tony Shiret said in a note March 9.

Sonae’s domestic growth began in the 1980s when Belmiro de Azevedo, the co-CEO’s father, took over a money-losing wood-panels manufacturer and expanded into retailing, telecommunications and shopping-centre development. Family holding Efanor is still the biggest shareholder with more than 50 percent.

Travel, Tourism

Sonae’s investments at various times extended to a travel agency and a tourist resort south of Lisbon, a construction company and one of Portugal’s leading daily newspapers, Publico. Azevedo said the company was adjusting to yielding some control over its far-flung operations as it moves ahead with the new approach to expansion.

“We are known for having a knack for buying rather than selling,” Azevedo said. “We’re getting more comfortable working with partners.”

By Anabela Reis; editors: Eric Pfanner and Paul Jarvis.

In This Article
Topics
Organisations

© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Retail
Analysis and advice from the front lines of the retail transformation.

What a Fashion Company Is Worth Today

In an era of austerity on Wall Street, apparel businesses are more likely to be valued on their profits rather than sales, which usually means lower payouts for founders and investors. That is, if they can find a buyer in the first place.


What’s the Plan at H&M?

The fast fashion giant occupies a shrinking middle ground between Shein and Zara. New CEO Daniel Ervér can lay out the path forward when the company reports quarterly results this week.


view more

Subscribe to the BoF Daily Digest

The essential daily round-up of fashion news, analysis, and breaking news alerts.

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
BoF Professional - How to Turn Data Into Meaningful Customer Connections
© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions, Privacy Policy, Cookie Policy and Accessibility Statement.
BoF Professional - How to Turn Data Into Meaningful Customer Connections