Soriana sees tepid year, but better 2010

MEXICO CITY Wed May 6, 2009 2:20pm EDT

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MEXICO CITY (Reuters) - Soriana, Mexico's No. 2 supermarket chain, will weather a rough year of recession and tepid sales but is optimistic that strong store growth will resume in 2010, a top company official said.

Soriana (SORIANAB.MX) Chief Financial Officer Aurelio Adan told the Reuters Latin American Investment Summit on Wednesday that same-store sales will be flat in 2009 compared with the previous year.

"This is a very difficult year," he said, citing the Mexican economic slump triggered largely by the recession in the United States, the country's main trade partner.

With Mexico's economy expected to fall by 4 percent or more this year and consumers stung by high unemployment rates, retailers are trying to keep clients in their stores with flashy promotions.

Soriana is recovering from an aggressive 2007 acquisition of nearly 200 stores from a smaller rival, Gigante (GIGANTE.MX). It spent most of last year adding the new stores to its network by updating systems, distribution routes and rebranding locations.

The purchase increased its debt burden but Adan said Soriana is well positioned to meet payments of up to 4 billion pesos in debt in 2009 and generate enough free cash flow to meet these and other obligations.

Soriana will keep its spending at a minimum this year -- it plans to open five new stores and revamp as many as 12 existing facilities -- while cutting some $152 million in costs, Adan said.

However, he said he sees clearer skies ahead.

"In 2010 we expect to open 40 new stores, without us borrowing any more money," he said.

(Reporting by Gaby Lopez and Cyntia Barrera Diaz; Editing by Richard Chang)

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