Most Romanian-Owned Retail Chains Entered Insolvency In ‘09

The leading Romanian-owned supermarket chains were deeply affected by the economic crisis this year, as they were confronted with a sluggish demand, high debts and a lack of financing, and most of them entered insolvency procedures.

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On Monday, hypermarket chain PIC - owned by brothers Cornel and Ilie Penescu - said it has asked for the beginning of the insolvency proceedings, as its sales fell and debts to suppliers continued to rise, despite a restructuring process started earlier in the year.

This was the last announcement this year on problems faced by the retailers owned by Romanian investors. Spar and Trident chains have also entered insolvency on demand, while several suppliers asked for the insolvency of Ivet Comprod, the owner of Ethos supermarket network, but the Ethos stores were transferred to another company.

The problems were due to various factors, including the macroeconomic situation, but also the retail market specifics, Capital Partners business analyst Andreea Mladin told MEDIAFAX Monday.

Mladin said the main reason behind the bankruptcy of local chains are high initial investments in fixed assets and stocks, which are necessary in the retail field and are mainly financed through banking loans, as well as the lack of a critical mass as regards the number of stores.

Therefore, the retail chains accumulated significant banking and commercial debts.

"The lower power of negotiation, inventories build-up, contracts with suppliers signed at pre-crisis prices and payment deadlines, as well as closing multi-annual lease contracts at high prices lead to the liabilities increase. Moreover, all the aforementioned factors correlated to the slight market contraction caused working capital difficulty and put pressure on the profit margins," Mladin said.

PIC said Monday its sales have fallen 30% on the year so far in 2009, while its debts to suppliers have increased.

PIC retail chain had five stores in the towns of Pitesti, Craiova, Braila, Oradea and Calarasi, but, following the restructuring process, the company closed down three of them.

On the other hand, several companies, including dairy products maker Tnuva and Pepsi bottler Quadrant Amroq Beverages, asked for the insolvency of Romanian retailer Ivet Comprod that used to own Ethos supermarket network, before the stores were transferred to another company.

Ivet Comprod's majority stockholder Ion Soloman transferred the Ethos stores to another company he equally owns, namely Ivet Logistic. In turn, M.G.F Grup asked in September the insolvency of Ivet Logistic for RON40,000 debts.

Ethos retail chain has 26 units in the capital city Bucharest as well as in the southern counties of Arges, Olt, Dambovita, Prahova and Calarasi.

Romania's first local supermarket chain that entered insolvency procedure was Spar Romania, held by brothers Ioan and Floare Cuc.

Spar Romania operates in franchise 21 supermarkets and is 99.99% held by consumer goods wholesaler Astral Impex.

Early this year, the company closed down the hypermarket in the central town of Targu Mures, which was its only hypermarket in Romania.

Also, in the second half of 2009, Trident retail chain, held by Constantin Mateescu, entered insolvency procedure upon demand.

The company operates two hypermarkets and two supermarkets in Romania, after it closed down two units this year.

Primavara supermarket chain, held by Ion Avram, has equally closed down one of its nine units in the summer of 2009.

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