Discount chain Colruyt's profit falls as inflation, tough competition take toll

(Reuters) -Belgian supermarket chain Colruyt on Tuesday reported a 25% decline in its full-year earnings, citing high inflation, declining volumes in food stores and increasing market competitiveness in both prices and promotions.

Although discount chains are gaining market share as shoppers look to save money amid record inflation, for some the promise of lower prices now appears to be a disadvantage as they struggle to pass on rising costs.

Colruyt, known for its discount supermarket chain, said its net profit fell to 288 million euros ($299.98 million) in the year ended March 31, against 385 million euros a year earlier, excluding one-off effects.

The group had anticipated a "significant to strong decrease" in the annual profit.

Colruyt expects its earnings before one-offs to further decrease in the current fiscal year. It said it would provide a full outlook in September.

"Colruyt Group expects the current macroeconomic context, which is marked by inflation, cost increases and a negative consumer confidence, to continue," it said in a statement.

"And this in a market environment that is particularly competitive."

The group's operating expenses climbed from 19.6% to 20% of its revenue in the year, driven by rising inflation on all key expenses, such as employee benefits and energy costs.

The combined market share in the group's main market Belgium for its largest supermarket chain Colruyt Lowest Prices, grocery store chain OKay, and the Spar brand increased to 30.8%.

The company said it would propose a gross dividend of 1.10 euros per share for the 2021/22 fiscal year.

($1 = 0.9601 euros)

(Reporting by Diana Mandiá in Gdansk; editing by Milla Nissi)