Czech Republic · The Czech Republic’s wholesale and retail trade sector is one of the important...

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Retail SectorCzech Republic

July 2015

CZ_44_0001_Jul’2015_GM_NY



Table of Contents

I. Retail Sector Overview

1. Retail Sector Highlights

2. Economic Importance

3. GDP Trends

4. GDP Trends (cont’d)

5. Driving Forces of Retail Sector

6. Forecast

7. Retail Sales Dynamics

8. Confidence Indicators

9. Household Loans

10.FDI Flows

11.Consumer Prices

12.Wage and Employment

13.Number of Enterprises

14.Government Policy

II. Supply Channels

1. Supply Channels Highlights

2. Customer Preferences for Shopping Place

3. Franchise Systems

4. Retail Market Ranking

5. Shopping Center Stock

6. Shopping Centers

III. Retail Trade Except of Motor Vehicles and

Motorcycles Sub-Sector

1. Retail Trade Sub-Sector

2. Retail Trade Sub-Sector (cont’d)

3. Retail Trade by Segments

4. Employment and Wages

5. Output and Sales

6. Food and Beverages Retail Market

7. Food and Beverages by Segments

8. Food and Beverages Trade

9. Pharmaceuticals Market

10.Apparel Retail Market

11.Furniture Market

IV. Wholesale Trade, Except of Motor Vehicles Sub-

Sector

1. Wholesale Trade Highlights

2. Key Indicators

V. Motor Vehicles and Motorcycles Sub-Sectors

1. Wholesale and Retail Trade of Motor Vehicles Highlights

2. Local Sales

3. Registrations

4. Passenger Car Registrations



Table of Contents

5. Light Commercial Vehicle Registrations

6. Employment and Wages

VI. E-Commerce

1. E-Commerce Highlights

2. Central Europe Ranking

3. Internet Retailers

VII. Major Players

1. Top M&A Deals

2. M&A Activity, 2013-2014

3. Tesco Stores CR

4. Tesco Stores CR (cont’d)

5. Ahold Czech Republic

6. Ahold Czech Republic (cont’d)

7. Kaufland Ceska Republika

8. Penny Market

9. Billa



I. Retail Sector Overview



Retail Sector Highlights

The Czech Republic’s wholesale and retail trade sector is one of the important sectors in the economy, accounting for 10.2% of total gross value added (GVA) in 2014. The sector

has been one of the drivers of economic growth in the last few years. The wholesale and retail trade sector grew by a real compound annual growth rate (CAGR) of 3.3% in the

period 2010-2014, outpacing the economy’s overall GVA growth rate of 1.2% for the same period. Still, the sector’s value-added output accounted for only 0.28% of the world

output of wholesale and retail services in 2014, according to the estimates of forecasting consultancy Oxford Economics.

Importance

Growth Rates

Drivers

Outlook

After the global financial crisis the Czech Republic’s retail trade sector followed a downward trend, but the tendency reversed and the sector started to recover in 2013, supported

by growing employment, increasing incomes, economic recovery and improving consumer confidence. Retail trade (excluding motor vehicles) rose by 3.3% y/y in 2014, while sale,

maintenance and repair of motor vehicles stepped up by 13.5% y/y for the same period – which were the highest growth rates reported in the last seven years. The sector is

labour-intensive. It employed about 1.24mn workers in 2014, accounting for 24% of the total employment in the country. There are about 250,000 enterprises operating in the trade

sector, of which more than 50% are in the retail trade sub-sector. Most of the enterprises are small ones and only 0.1% of retail trade enterprises have more than 250 workers.

Increasing real incomes and growing employment have been the main driving factors for the retail’s sector development in the country. In addition, the improved business and

consumer confidence of the last two years – together with the economic recovery which started at end-2013 and has continued in 2015 – has had a positive effect on domestic

demand and consumer consumption, which has stimulated retail sales. The Czech Republic has had one of the lowest unemployment rates in the EU (6.1% in 2014, far below the

EU average of 10.2%). Poverty has also declined in the country in the last few years, which has further boosted consumption and retail trade. The percentage of the population

reckoned to be “at risk of poverty” has dropped, falling from 9.6% in 2012 to 8.6% in 2013, the lowest in any EU country.

The wholesale and retail trade sector is expected to continue to grow at a high annual rate of 2.9% over the period 2015-2020, according to the estimates of economic research

specialist Oxford Economics. The sector will continue to be one of the main drivers of economic growth. This will result not only from domestic demand and strong household

consumption, but also from high investments in the sector, which are expected to reach CZK 88.4bn in 2020.



Source:

Economic Importance

Main Economic Indicators

Czech National Bank, CEIC, IMF, Statistics office

2008 2009 2010 2011 2012 2013 2014

Total population, mn 10.5 10.5 10.5 10.5 10.5 10.5 10.5

Urban population, % of total 72.8% 72.9% 72.8% 73.1% 73.1% 73.1% 73.2%

GDP, current prices (CZK bn) 4,012 3,925 3,951 4,020 4,048 4,086 4,266

GDP, real growth rate, % 2.5 -4.7 2.1 2.0 -0.7 -0.7 2.0

GDP per capita, current prices USD 22,649 19,698 19,764 21,656 19,670 19,858 na

Final Consumption Expenditures, CZK mn,

current prices2,678 2,731 2,756 2,775 2,781 2,829 2,890

Final Consumption Expenditures,s (% of GDP) 66.7% 69.6% 69.8% 69.0% 68.7% 69.2% 67.7%

Wholesale and Retail Trade; Repair of Motor

Vehicles and Motorcycles, Gross Value Added,

current prices (CZK bn)

394 357 375 376 380 376 395



% of total GVA

10.8% 10.1% 10.5% 10.3% 10.4% 10.3% 10.2%



y/y change, real growth, %

0.0 -7.6 8.5 4.0 0.8 -0.6 3.8

FDI Flow, Wholesale and Retail Trade, Repair of

Motor Vehicle and Motorcycles (CZK mn)na 11,561 35,628 8,007 23,030 -24,731 1,201

FDI Flow, Services na 67,513 112,027 -5,384 109,955 86,873 97,726

FDI Flow, Wholesale and Retail Trade, Repair of

Motor Vehicle and Motorcycles (% of total in

services)

na 17.1% 31.8% -148.7% 20.9% -28.5% 1.2%



Comments

Source:

GDP Trends

The Czech Republic is а service-based economy, with the services sector accounting for a fairly steady share of around 60% in total GVA.

The service sector has been one of factors driving economic growth, making a positive contribution to the GVA growth rate (0.6pps in 2013

and 0.9pps in 2014). Along with finance and insurance activities, trade has been among the main driving forces behind the performance of

the services sector, with trade and finance and insurance activities, achieving average real growth rates of 3.3% and 3.7%, respectively, over

the last five years. Trade sector dynamics have been in strong correlation with those of GDP in recent years. The sector accounted for 10.2%

of GVA in 2014, contributing 0.4pps to GVA growth of 2.6% in 2014.

GVA Structure GDP and Trade Value Added, Real Growth Rate, %

CEIC, Statistics office

2.1% 1.8% 1.7% 2.4% 2.6% 2.6% 2.6%

37.7% 36.8% 36.7% 37.0% 37.0% 36.7% 37.9%

60.2% 61.4% 61.6% 60.6% 60.4% 60.7% 59.5%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014

Services Industry (incl. construction) Agriculture

0.0%

-7.6%

8.5%

4.0%

0.8% -0.6%

3.8%

2.5%

-4.7%

2.1% 2.0%

-0.7%-0.7%

2.0%

2008 2009 2010 2011 2012 2013 2014

Wholesale and retail trade; repair of motor vehicles and motorcycles

GDP



Comments

Source:

GDP Trends (cont’d)

From the final expenditure side, household consumption has been the engine of economic growth, rising by 0.3% on average over the last five years. Increasing

real incomes, economic recovery, low interest rates and low inflation contributed positively to the expansion of consumption. The positive growth of household

consumption reported in 2013 served as a base for gradual recovery, triggering domestic demand. Thus, the growth rate of household consumption rose to 1.7%

y/y in 2014. Increasing business and consumer confidence from mid-2013 gave reason to suppose that consumption would continue to rise in the following years.

And subsequent data confirmed these tendencies, as GDP increased by 4.2% y/y in Q1 2015, exceeding the expected growth rate for the quarter by 0.3pps. Again,

the main factors were domestic demand and, in particular, household consumption and investments.

GDP, Final Expenditures, % GDP and Household Consumption, Real Growth Rate, %

47.7% 48.9% 49.3% 49.3% 49.4% 49.6% 48.2%

19.1% 20.7% 20.5% 19.7% 19.4% 19.6% 19.6%

31.1% 26.5% 27.2% 27.0% 26.3% 25.0% 25.4%

2.2% 3.9% 3.1% 3.9% 4.9% 5.8% 6.9%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013 2014

Net Export Gross Capital Formation

Government Spending Households and NPISH Consumption

2.5%

-4.7%

2.1% 2.0%

-0.7% -0.7%

2.0%

2.8%

-0.6%

0.9%

0.3%

-1.8%

0.4%

1.7%

2008 2009 2010 2011 2012 2013 2014

GDP Household Consumption

CEIC, Statistics office



Source:

Driving Forces of Retail Sector

Comments

Average Unemployment Rate, %

Population, End of the Year

Average Gross Wages per Person

Statistics office, World Bank, CEIC, Eurostat

The main factors that contributed to the growth of the retail sector were

higher real wages and a stable labour market, which has been

characterised by growing employment and decreasing unemployment

rates over the last five years. Annual average unemployment fell to 6.1%

in 2014, which was among the lowest levels in the EU, bettered only by

Germany (5%), Austria (5.6%), Luxembourg and Malta (5.9%), Iceland

(5%) and Norway (3.5%). The EU average unemployment rate stood at

10.2% in 2014 (10.9% in 2013). The demographic trends operating in the

Czech Republic were also favourable, as population continued to grow

and the urbanisation rate rose to 73.2% in 2014, compared to 72.8% in

2008. The at-risk-of-poverty rate dropped to 8.6% in 2013 (from 9.6% in

2012), the lowest in the EU.

4.4%

6.7%

7.3%6.7%

7.0% 7.0%

6.1%

2008 2009 2010 2011 2012 2013 2014

10.47

10.51

10.53

10.51

10.52

10.51

10.54

7.62

7.66

7.67

7.68

7.68

7.68

7.71

2008

2009

2010

2011

2012

2013

2014

Urban population, mn Total population, mn

24,3

09

25,4

18

25,5

91 26,2

11 27,0

55

26,5

91 27,2

00

2.6%

4.2%

-1.4%

0.0% 0.4%

-2.8%

1.8%

2008 2009 2010 2011 2012 2013 2014

Nominal value, CZK Рeal growth rate, %



Source:

Sector Forecast

Retail & Wholesale Distribution, VA, % of world

Retail & Wholesale Distribution, VA, Real USD bn

Employment in Retail & Wholesale Distribution, Thousands

Comments

Oxford Economics

Retail and wholesale value-added is expected to increase at an

average rate of 2.9% in the period 2015-2020, according to

Oxford Economics’ forecasts. It is expected to reach to USD

24.6bn in 2020, on the back of domestic demand related to

increasing disposable incomes and higher employment.

Investments in the distribution chain are also forecast to

increase by 3.9% per year on average over the same period –

and to reach to CZK 88.4bn in 2020.

724.6

727.5728.5 729.0 729.6

731.1

734.2

2014 2015 2016 2017 2018 2019 2020

0.2770.276

0.274

0.272

0.2710.270

0.269

2014 2015 2016 2017 2018 2019 2020

20.7821.34

21.94

22.56

23.22

23.91

24.61

2014 2015 2016 2017 2018 2019 2020



Comments

Source:

Retail Sales Dynamics

Retail trade (excluding motor vehicles) rose by 3.3% y/y in 2014, while sales, maintenance and repair of motor vehicles increased 13.5% y/y in that year.

These were the highest growth rates reported in seven years.

The outlook for retail trade in 2015 is good, taking into account the continued growth of GDP, which was one of the highest in the last few years (4.2% y/y

in the first quarter of 2015).

Retail Trade Except of Motor Vehicles, y/y change, %* Sale, Maintenance and Repair of Motor Vehicles, y/y change,%

Statistics office, - * seasonally adjusted, but not working day adjusted

-20

-15

-10

-5

0

5

10

15

20

25

Jan,

200

8

Jan,

200

9

Jan,

201

0

Jan,

201

1

Jan,

201

2

Jan,

201

3

Jan,

201

4

Jan,

201

5

Sale, maintenance & repair of motor vehicles & motorcycles

-8-6-4-202468

101214

Jan,

200

8

Jan,

200

9

Jan,

201

0

Jan,

201

1

Jan,

201

2

Jan,

201

3

Jan,

201

4

Jan,

201

5Retail trade except of motor vehicles and motorcycles



Source:

Confidence Indicators

Comments

CEIC, Statistics office, - * seasonally adjusted

Business Confidence Index, 2005=100*

Confidence Indices, y/y change*

70

80

90

100

Dec, 2008 Dec, 2009 Dec, 2010 Dec, 2011 Dec, 2012 Dec, 2013 Dec, 2014

60

70

80

90

100

110

Dec, 2008 Dec, 2009 Dec, 2010 Dec, 2011 Dec, 2012 Dec, 2013 Dec, 2014

2009 2010 2011 2012 2013 2014

Consumer Confidence, y/y growth rate 18.0% -2.6% -22.6% 5.4% 22.3% 13.5%

Business Confidence, y/y growth rate 1.9% 17.8% -9.0% -3.5% 7.4% 4.3%



Comments

Source:

Household Loans

Increasing incomes and growing employment due to economic expansion have been driving credit demand expansion since 2003. The credit boom

continued until the global financial crisis, when high interest rates cooled down demand. However, even after the financial crisis, household loans continued

to increase, albeit at a decelerating growth rate, which fell to its lowest in 2012, at 3.4% y/y. Since 2013, household lending growth has picked up

somewhat due to low interest rates and the economic recovery that started in the middle of that year. In 2014, no less than 73.3% of the credits extended

were for housing purchases, followed by consumer loans (15.8% of the total as at end-2014). We expect that the demand for credit will continue to be brisk

this year and will boost further consumer spending on durable goods, automobiles and real estate.

Household Loans, eop, CZK mn Household Debt, % of nominal GDP

Czech National Bank, CEIC

25.1

26.7

27.8

28.7

29.529.0

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

851,

470

940,

483

1,02

8,14

1

1,09

5,24

4

1,13

2,23

1

1,18

0,73

1

1,22

8,14

9

20.3%

10.5%9.3%

6.5%

3.4%4.3% 4.0%

2008 2009 2010 2011 2012 2013 2014



Comments

Source:

FDI Flows

The trade sector as a whole (including both wholesale and retail trade and the sub-sector dealing with repair of motor vehicles and motorcycles) has

attracted a significant portion of FDI inflows into the Czech Republic, accounting for 9.7% of the total over the period 2009-2014. According to international

consultancy firm KPMG, factors driving general FDI increase have included good infrastructure, advantageous geographical location, availability of

suppliers and inputs, and high profitability, as well as low external and internal imbalances. In terms of the profitability of FDI in the whole economy, the

Czech Republic ranked first among EU new member states (the countries entered the EU in 2004 and 2007) in 2012, followed by Estonia. Among types of

FDI inflow to the sector, “other capital” – as distinct from equity capital and reinvested earnings – was the most prominent source of increase, accounting

for about 70% of the sector’s total FDI in the period 2009-2014.

Total FDI and FDI in Wholesale and Retail Trade, CZK mn FDI Inflow Structure, CZK mn

CEIC, Czech National Bank, KPMG, AmCham

55,7

94

117,

275

41,0

11

156,

309

71,9

18

122,

646

11,5

61 35,6

28

8,00

7

23,0

30

-24,

731

1,20

1

2009 2010 2011 2012 2013 2014

Foreign Direct Investment, Flow

Wholesale and Retail Trade, Repair of Motor Vehicle and Motorcycles

5,93

9 11,2

59

1,10

9 5,37

4

-8,1

18

2,60

9

-1,3

14

3,60

6

-595

499

-6,3

55

2,13

96,93

6

20,7

63

7,49

2

17,1

57

-10,

258 -3,5

47

2009 2010 2011 2012 2013 2014

Equity Capital Reinvested Earnings Other Capital



Comments

Source:

Consumer Prices

Inflation has been low over the last few years, and has dropped significantly since a modest spike in 2012: it is now at or below the lower boundary of the 1%

tolerance band around the inflation target of the Czech National Bank (CNB), which has been at 2% since 2010. The government has increased a number of taxes,

including VAT, but the policy has not had sufficient positive impact to overcome the tendency to price slowdown. In autumn 2013, at a moment when interest rates

were too low to cut further the central bank was forced to implement an expansionary monetary policy by means of interventions on the foreign exchange (FX)

market, in order to weaken the koruna and to maintain the exchange rate close to EUR1:CZK 27. In 2015, the bank decided to continue with FX intervention until

mid-2016 in order to cope with inflation dynamics. The main factors for decreasing overall price growth have been falling prices of fuels and telecommunications

services.

Inflation, Measured by Harmonized Consumer Price Index, % CNB’s Key Policy Rates, %

Czech National Bank, Statistics office

3.9

4.7

1.8

0.1

2.8

1.9

2.52.8

6.3

1.01.5

1.9

3.3

1.4

0.4

2000 2002 2004 2006 2008 2010 2012 2014

Inflation

0.75 0.75

0.50

0.05 0.05 0.050.05 0.05

0.25 0.25 0.250.05 0.05 0.05

0.05 0.05

1.751.75

1.50

0.25 0.25 0.25 0.25 0.25

2W repo Discount Lombard



Comments

Source:

Wage and Employment

In 2014, employment in the retail sector continued to increase for the second consecutive year, boosted by domestic demand. It reached 1.24mn in 2014,

up by 0.6% y/y. Employment in the sector accounted for about 24% of total employment in the country in 2014, exceeding the level in the pre-crisis period

(23.7% in 2008), which suggests that the sector has succeeded in recovering and is showing potential for higher growth rates than those of the total

economy. The average gross monthly wage also started to increase in 2014, due to higher demand for labour as a result of the expansion of the economy

and higher consumption. The average gross monthly wage in the sector was lower (by around 8.6% in 2014) than the average wage for the total economy,

probably because the sector is labour-intensive and uses mainly low-skilled people.

Average Gross Monthly Wage, CZK Employment in Trade, ESA2010, Person

Statistics office, CEIC

22,7

73 23,5

61

24,5

81 25,4

05

24,2

61 24,8

74

0.5%

3.5%

4.3%

3.4%

-4.5%

2.5%

2009 2010 2011 2012 2013 2014

Avg Gross Monthly Wages in Wholesale, Retail Trade and Repair of MotorVehiclesy/y change, %

1,23

4,51

7

1,24

6,33

9

1,24

1,90

1

1,23

1,77

7

1,23

4,31

8 1,24

1,94

1

-0.7%

1.0%

-0.4%

-0.8%

0.2%

0.6%

2009 2010 2011 2012 2013 2014

Trade, Transportation, Accommodation & Food Services

y/y change, %



Comments

Source:

Number of Enterprises

According to the available official data, the total number of active enterprises in the trade sector (including NACE 45, 46 and 47) reached

248,104 as at end-2012, up by 1.1% y/y – and by 19.2% on 2006. The number of enterprises will probably turn out to have increased in 2013

and 2014 at a higher annual rate than in 2012, to judge from the reported growth rates of the sector and higher household consumption,

which has stimulated demand for the sector’s products. Most of enterprises were in the retail trade sub-sector (NACE 47), which accounted

for 53.2% of the total number of enterprises. Meanwhile, the retail sector was dominated by small businesses: at end-2012, just 107

enterprises had workforces of more than 250 employees.

Number of Active Enterprises, Units (year-end) Structure of Trade Sector, Units

Statistics office

202,

074

204,

167

212,

578

222,

781

231,

934

245,

411

248,

104

2006 2007 2008 2009 2010 2011 2012

Trade

30,3

89

30,6

59

31,5

62

32,6

51

32,8

10

32,9

74

32,7

1851,1

24

52,3

67

58,0

50

61,5

44

69,9

45

77,0

03

83,2

50

120,

561

121,

141

122,

966

128,

586

129,

179

135,

434

132,

136

2006 2007 2008 2009 2010 2011 2012

Wholesale and retail trade and repair of motor vehicles and motorcycles (CZ-NACE 45)

Wholesale trade, except of motor vehicles and motorcycles (CZ-NACE 46)

Retail trade, except of motor vehicles and motorcycles (CZ-NACE 47)



Source:

Government Policy

VAT rate

The government imposed a number of fiscal restrictions after the global financial crisis and the eurozone debt crisis, in

order to cope with the increasing budget deficit, which was at its highest at 5.5% of GDP in 2009 and 3.9% in 2012. In

order to decrease the budget deficit the government started a policy of increasing its revenues by imposing higher VAT

rates. The VAT rate was increased by 1pps to 20% as of January 1, 2010 and by an additional 1pps to 21% as of January

1, 2013. The country had a reduced VAT rate of 15% on foodstuffs, medical goods and services, pharmaceutical products,

passenger transport, newspapers, admission to cultural sporting and entertainment events, and hotels. As of January 1,

2015, the government approved a second new reduced VAT rate of 10% on medicines, pharmaceuticals, books and baby

foodstuffs. The government planned to eliminate the reduced VAT rate by imposing a single VAT rate at 17.5%, but has

delayed its plans to 2016. Thus, in order to reduce the tax burden, the government decided to introduce the second

reduced VAT rate. Fiscal policy has now turned expansionary, which will have a positive effect on disposable incomes and

on the consumption of various goods and services. The estimated cost for the government of introducing the second

reduced VAT rate is CZK 3bn.

Monetary

Policy

As noted above, the central bank has intervened on the forex market in order to keep the Czech koruna weak in relation to

foreign currencies. This policy had a positive impact on sales, especially in export-oriented sectors. The expansionary

monetary policy has affected economic development positively. Increasing disposable incomes, the low unemployment

rate and high consumer confidence led to a significant increase in retail trade (excluding motor vehicles), which stepped up

by 3.3% y/y in 2014.

Czech National Bank, Statistics office, Europa.eu, Vatlive.com



II. Supply Channels



Supply Channels Highlights

The main type of retail channel in the Czech Republic is the hypermarket. In 2014, the top five hypermarket retailers reported a 1% y/y increase in their sales, according to a study by

the United States Department of Agriculture (USDA). They operated 307 outlets with total selling space of more than 1,400 square meters. The five biggest hypermarket chains in the

country were Albert, Globus, Interspar, Kaufland and Tesco. Kaufland is the most popular chain on the market with a 23% market share, according to a survey conducted in 2015 by

Prague-based market research company Incoma GfK.

Hypermarkets

Discounters

Supermarkets

Franchise Market

Discounters have gained popularity in recent years, especially in the years since the economic downturn of 2012. They reached a share of 25% as of end-2014, up from 18% at

end-2012, according to Incoma’s 2015 study. The top two discounters are Lidl and Penny Market. Lidl has attracted customers by offering non-food items at competitive prices.

Discounting is at present the retailing channel most dependent on economic development. The behaviour of discounters’ customers has been determined mainly by overall price

levels and has been less dependent on other factors. Customers preferred the discounters because they were offering good prices and were also time-saving. Discounters’ sales

rose quickest in 2014, up 6% y/y, according to the USDA.

Supermarkets were preferred by 16% of households in 2014 – down from 18% in 2012. The top three supermarket chains in the country are Albert, Billa and Tesco. Supermarkets reported a growth rate

of 3% y/y in sales in 2014, according to USDA’s report. According to a survey carried out for Billa by the Datank market research agency (and reported by national news agency CIA), Czech families do

not have a preference for a “big shopping”: two-thirds of shoppers prefer to visit the supermarket several times a week. The most important factor for customers was the price of goods. The survey

showed that if the stores announced discounts, 89% of respondents said that they were motivated to go to purchase. Most of the respondents (99%) preferred Czech foodstuffs; specialised retailers also

have great popularity. About 86% of households shopped in specialised stores, such as butcher shops, bakeries, greengrocers, etc. Customers visited specialised stores once a week on average,

according to data from international market research company GfK.

The franchise market in the Czech Republic started to develop as long ago as 1990. The number of franchise agreements has been growing in recent years, reaching 219 in 2013,

according to data published by the international consulting company PROFIT system . That figure represents a y/y growth of almost 10%, suggesting that there is keen interest in

using this system for expansion. The number of franchise units rose by more than 16% y/y to 6,152 in 2013. The biggest increase in franchise systems was seen in the trade

sector, while the services sector reported a decline.



Source:

Comments

Customer Preferences for Shopping Place

The shopping outlets most favoured by households were hypermarkets. As many as 47% of households preferred them as of end-2014, at the expense of

small shops, which offered a smaller range of goods, in most cases at higher prices. As many as 82% of households claimed that the economic situation

had an impact on their shopping behaviour, according to the results of an Incoma Shopping Monitor Survey. About 50% of households responded that the

economic crisis “definitely” had an impact on their shopping behaviour (versus 27% in 2010), while 32% of households claimed that the economic crisis had

an impact on their behaviour “to some extent”(versus 36% in 2010).

Main Shopping Places, % of Households

Incoma GfK

39 40 43 44 47 44 47

16 17 1518

1817

16

25 24 25 21 18 25 24

17 15 15 17 15 12 133 3 3 1 2

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013 2014

Elsewhere

Small shops

Discounters

Supermarkets

Hypermarkets



Comments

Source:

Franchise Systems

Entrepreneurs have chosen franchising as a preferred way of doing business due to the economic situation, which was not so favourable especially in 2012 and

2013. About 55% of the franchise systems were in the services sector, while the remainder were in the trade sector. The number of franchise systems in the trade

sector rose by 29% y/y to 98 in 2013, while those in the services sector declined by 6% y/y to 121. Their expansion in retail trade was due to small grocery stores

and convenience stores, which moved closer to customers, according to Marek Halfar, the director of PROFIT system. Most of the franchise systems are of

domestic origin, accounting for 132 or 60.3% of the total number of franchise systems. Taking into account the fact that, in Europe as a whole, domestic franchise

systems account for about 70% of the total, it can be expected that the number of companies operating under franchise in the Czech Republic will continue to grow,

Halfar added.

Number of Franchise Systems, Units Origin of Franchise Systems, %

PROFIT system

150 16

8

200 21

9

12.0%

19.0%

9.5%

2010 2011 2012 2013

Number of Franchise Systems in the Czech Republic

y/y change, %

Foreign franchise

systems 39.7

Domestic franchaise

systems 60.3



Source:

Retail Market Ranking

Target Markets 2015

The Czech Republic ranked as the 11th most

attractive European market for international retailers

and the 17th globally, according to the 2015 survey

How Active Are Retailers Globally?, published by

international real-estate specialists CBRE.

The Czech Republic was a more attractive area for

international retailers than, for example, the

Scandinavian countries, Ireland or Portugal.

Its most recent scores mark a slight decline,

however: in 2013, the country had ranked 10th, with

16% of retailers planning to open a store there in

2014.

CBRE’s report showed that the Czech Republic’s

market was a saturated one which, however, still

offered retailers high-quality retail space. The country

actually offered not only modern retail shopping

centres, but also a highly developed high street.

According to the report, most retailers entered the

country first in the capital Prague and after that in

regional cities like Brno and Ostrava.

CBRE Research

Rank Country% of Retailers Targeting

the Country in 2015

1 Germany 40%

2 United Kingdom 33%

3 France 31%

4 Spain 23%

5 Italy 21%

6 Netherlands 21%

7 Belgium 20%

8 Austria 19%

9 Swtzerland 17%

10 Poland 14%

11 Czech Republic 13%



Source:

Shopping Center Stock

Retail Market Key Figure, end-2014

Shopping Center Stock by an Extend of Refurbishment, 2014

Shopping Center Stock, by Size, end-2014

Comments

CBRE Research

The retail real estate market in the country continued its

positive trend in 2014 — its expansion having been especially

significant in the preceding two years. The total shopping-

centre stock reached 2.313mn sq m at end-2014, up by 3% y/y.

However, new supply in 2014 was only 78,000sq m, the third-

lowest level in the last ten years.

In 2014, five new shopping centres were opened. These were

mainly small ones, but were the first in their respective

locations.

Prague Regions

Total shopping center stock (sq m) 814,000 1,499,000

Space under construction (sq m) 8,000 51,900

Prime high street rent (EUR per sq m per

month)190.0 70.0

Prime shopping center rent (EUR per sq m per

month)100.0 55.0

Prime retail park rent (EUR per sq m per month) 12.5 11.0 Small 26%

Medium 34%

Large 25%

Very Large15%

None 66%

Partial 24%

Full 10%



Source:

Shopping Centers

Completed Shopping Centers, Year-end 2014

Under Construction and Planned Shopping Centers, Year-end 2014

CBRE

Project Name City GLA (sq m) Developer

H1 Galerie Teplice Teplice 21,800 Dandreet

Pivovar Decin Decin 17,500 Settimo Development

OC Luziny Prague 16,000 Urban Developers and Investors LTD

H2 Quadrio Prague 8,000 CPI

Fryda Frydek-Mistek 14,800 TK Development

Project Name City Year GLA (sq m) Developer

Under

ConstructionCentral Kladno Kladno 2015 26,000 Crestyll

Aupark Hradec Kralove 2015 25,900 HB Reavis

Nova Plamovka Prague 2016 8,000 Metrostav

Olanned Borislavka Prague 2017 10,000 KKCG

Centrum Chodov Prague 2017 40,700 Unibail-Rodamco



III. Retail Trade (Excluding Motor Vehicles and Motorcycles Sub-

Sector)



Retail Trade Sub-Sector

Retail trade in non-specialised stores generated about 40% of the total sales of the sub-sector. It is also one of the segments which

reports strong growth rates, especially in 2014, when they increased 3% y/y. The segment’s development is determined by higher

growth in retail sales in non-specialised stores, with food, beverages and tobacco dominating and rising by 3.4% y/y in 2014, following

a 1.1% y/y growth rate the year before.

The most dynamic segment in the sector is retail trade outside of stores, stalls or markets, which reported strong growth rates even in the crisis years. The sales generated by the segment accounted for about 6-7% of total retail trade sub-sector sales. However, the segment’s high growth rates, reported at 9-10% y/y in the last two years, meant that its contribution to the reported growth rate of the whole sector has been significant. The positive development of the segment can be explained by the strong demand for various products via mail order houses or via the internet, triggered by new technologies and the expansion of e-commerce. The changed behaviour of customers, who nowadays try not to spend too much time shopping in stores, has determined the strong performance of the segment.

Retail trade (excluding motor vehicles and motorcycles) accounted for 32.3% of the sector’s output and employed 46.2% of trade

sector personnel in 2014. The sub-sector also reported the highest trade margin of 23.2% in 2014, up by 0.2pps y/y. Its average

monthly gross wage was below that of the trade sector as a whole, at only 79.3%. The growth rate of the sub-sector outpaced that of

the trade sector as a whole.

Importance

Online Retail

Non-specialised Stores



Retail Trade Sub-Sector (cont’d)

The food and beverages sector generated about 8.3% of the sales revenues of processing industry in 2013. The retail sales of food, beverages and tobacco in specialised stores dropped by 1% y/y in 2013 and grew by 1.2% y/y in 2014 in line with the dynamics of household consumption, where the food and beverages accounted for about 23% of household expenditures. The largest revenues in the food sector came from meat and meat products (22.7% in 2013), followed by dairy products (17%). Meat consumption has followed a downward trend and has still not regained its pre-crisis level. Annual meat consumption per capita reached 74.8 kg in 2013 versus 80.4 kg in 2008. The revenues from the sales of beverages also declined after the crisis. Reported revenues reached CZK 54.8bn, down 2.8% y/y in 2013. However, it is likely that in 2014 revenues will have started to increase, as there was strong external demand for beer, which accounted for the main part of the alcoholic drinks market in the country (40.1% in 2013). The Czech Republic remains the country with the highest beer consumption per capita in the world (144 liters in 2014).

Food and Beverages

Pharmaceuticals

Apparel Retail

Furniture

The pharmaceutical market’s value shrank by 9% to EUR 2,125mn in 2013, according to data from the European Federation of Pharmaceutical Industries and

Associations. The industry employed 14,800 persons in 2013, up from 2,300 the year before, and invested EUR 77mn in research and development (R&D). The

expansion of the sector in 2013 was in line with improved prospects for the development of the economy, higher incomes and growing employment. In 2014, the

sector is expected to have continued to grow. The anticipated CAGR for the period 2013-2018 was 3.8%, according to the estimates of the Marketline industry

research consultancy. The main player on the market was Johnson and Johnson, which had a market share of 16.8% in 2013.

Households have been spending about 4.7% of their expenditures on clothing and footwear over the past couple of years, according to the data

provided by the Czech Statistics Office (CZSO). The revenues generated by the segment stood at CZK 49.5bn in 2013. The Czech apparel retail

market accounted for 0.6% of the European market in 2013.

Furniture retail reported a 13% y/y increase in revenues in 2014, which was the highest growth rate seen in a decade and a half, local daily E15 reported. The

production of the sector reached CZK 40bn in 2014, according to the Association of Czech Furniture Makers. The surge in the sector’s revenues was due to an

significant increase in exports, while domestic sales fell. The reason for that was the fact that local consumers sacrificed quality for lower prices. Thus, the net

trade balance in furniture reached CZK 7.5bn in 2014, increasing significantly as compared to a year ago. The surge in exports was triggered by higher external

demand, related to the recovery of the European economy.



Source:

Retail Trade by Segments

Retail Sales by Main Segments, Nominal Growth Rates, %

Statistics office

2008 2009 2010 2011 2012 2013 2014

Retail trade except of motor vehicles and motorcycles (CZ-NACE 47) 7.1 -5.9 -0.4 2.5 0.3 -0.5 3.3

Retail sale in non-specialised stores 4.9 -2.5 -0.6 2.7 -0.4 0.6 3.0

Retail sale of food, beverages and tobacco in specialised stores 0.6 -6.8 -5.9 0.9 0.0 -1.0 1.2

Retail sale of automotive fuel 22.4 -16.6 9.7 7.3 5.1 -3.8 2.2

Retail sale of information and communication equipment in specialised stores 0.7 -11.3 -4.2 -2.8 0.2 0.2 7.3

Retail sale of other household equipment in specialised stores 4.1 -8.8 -6.2 0.4 -3.2 -4.4 3.8

Retail sale of cultural and recreation goods in specialised stores 7.2 -1.0 -1.1 2.3 2.8 0.5 5.4

Retail sale of other goods in specialised stores 2.2 0.2 -1.2 1.2 -0.1 -1.1 2.1

Retail sale via stalls and markets -6.9 -4.0 -3.0 -11.2 -8.4 -0.7 -3.3

Retail trade not in stores, stalls or markets 16.2 -3.6 0.9 3.3 1.2 9.0 9.8

incl. Retail sale via mail order houses or via Internet 20.5 -0.7 6.7 7.6 4.0 16.2 15.0



Comments

Source:

Employment and Wages

Average Number of Employees, Persons Average Monthly Gross Wage, CZK

Statistics office

240,583

241,476

240,314

241,201

234,875

234,914

234,478

237,195 232,721

231,458

230,478

232,482

I II III IV I II III IV I II III 1) IIV2)

2012 2013 2014

Average registered number of employees (actual persons)16,831

17,249

17,355

18,597

16,983

17,426

17,826

18,441

17,552

18,058

18,278

18,900

I II III IV I II III IV I II III IV

2012 2013 2014

Average monthly gross wage per actual person

The average registered number of employees in the sub-sector has decreased in recent years, especially after the global financial crisis in

2008, when the average number of employees was 245,963 persons. The non-financial corporations and households in the sub-sector tried

to restructure their enterprises in order to cope with the negative effects of crisis, which were related mainly to the lower demand for the

sector’s products such as automotive fuel, information and communication equipment, and other household equipment.

Meanwhile, the sub-sector’s enterprises managed to increase the average monthly gross wage to CZK 18,196 in 2014 (compared with CZK

15,863 in 2008).



Comments

Source:

Output and Sales

The sub-sector generated CZK 956bn worth of sales in 2014, up by 2.9% y/y, following a decline of 0.5% y/y in the previous year. The

recovery of domestic consumption explains the improved performance of the retail trade sub-sector. Good perspectives for economic

development in 2015 and improved consumer confidence will have positive effects on the sub-sector’s development. The output of the sub-

sector reached CZK 257.1bn in 2014, up by 3.4% y/y, accounting for 32% of the sector’s output.

Sales, CZK mn Output and Value Added, CZK mn

Statistics office

213,337

233,035

229,816

257,021

207,246

228,713

231,428

260,977

213,246

237,246

237,605

267,596


2012 2013 2014

Sales,total

55,413

63,442

61,482

72,325 53,740

61,030

60,983

72,939 55,499

63,669

63,170

74,773

25,032

28,952

29,240

35,951 23,191

27,978

29,282

37,344 24,445

28,997

29,466

38,649


2012 2013 2014

Outputs, incl. trade margin Value added



Source:

Food and Beverages Retail Market

Food Retail Revenues, CZK bn

Food Retail Market Revenues’ Forecast

Food Retail Market Distribution, % Share

Comments

Marketline, Statistics office

The food retail market, including retail sales of food products and beverages, generated total

revenues of CZK 408bn in 2013, down by 0.9% y/y, as Marketline reported. The CAGR for the

period 2009-2013 was 0.3%. The downward trend in the segment’s revenues was related to

low domestic and external demand. However, in 2014, the segment can be expected to report

an increase, due to the recovery of domestic consumption, which reported a growth rate of

1.7% y/y in 2014. Food and beverages accounted for the biggest share of household

expenditures (about 23% in 2014).

The recovery of external demand in 2014 and 2015 will also contribute to higher revenues for

the segment in the coming years. The Czech Republic is a net exporter of beverages and

tobacco products and a net importer of food products.

The 2013 turnover of the organic food market surged by 10% to CZK 2.7bn, of which domestic

consumption accounted for CZK 1.95bn. Of the latter total, CZK 1,745bn was generated by

sales in retail outlets (as opposed to public catering and direct sales).

403

410

423

411

408

1.7%

3.1%

-2.7%

-0.9%

2009 2010 2011 2012 2013

Food Retail Industry Value, CZK bn y/y change, %

Supermarkets/hypermarkets

49.9

Independent and Specialist

Stores 35.9

Convenience stores 12

Other 2.2

410.

1 411.

2

413.

9

413.

9

414.

6

0.6%

0.3%

0.7%

0.0%

0.2%

2014f 2015f 2016f 2017F 2018f

Food Retail Industry Value, CZK bn y/y change, %



Source:

Food and Beverages by Segments

Meat and Meat Products’ Revenues, CZK bn

Bakery Products’ Revenues, CZK bn

Dairy Products’ Revenues, CZK bn

Beverages’ Revenues, CZK bn

Ministry of Agriculture

57.1

54.1

51.3 51.7

52.8

51.7

2008 2009 2010 2011 2012 2013

41.1

35.9

37.0

38.938.1

41.0

2008 2009 2010 2011 2012 2013

32.5

30.2 29.9

31.631.2

27.4

2008 2009 2010 2011 2012 2013

63.5

60.9

56.455.6

56.4

54.8

2008 2009 2010 2011 2012 2013



Source:

Food and Beverages Trade

Exports and Imports of Food Products, CZK bn

Exports and Imports of Beverages, CZK bn

Trade Balance of Food Products, CZK bn

Trade Balance of Beverages, CZK bn

Statistics office- External Trade Database

77.9

73.9

76.3 91

.4 108.

1

116.

1

130.

2

105.

2

106.

9

112.

6

123.

2

136.

8

145.

8

157.

4

2008 2009 2010 2011 2012 2013 2014

Exports of Food and Live Animals Import of Food and Live Animals

-27.

3

-33

-36.

3 -31.

8 -28.

7

-29.

7

-27.

2

2008 2009 2010 2011 2012 2013 2014

16.4

16.2

16.8

17.1 19

.9 22.6 27

.1

12.7

13.5

14.4 16

.3 18.5

19.8

19.6

2008 2009 2010 2011 2012 2013 2014

Exports of Beverages and Tobacco

Imports of Beverages and Tobacco

17.6

14.3

19.9 21

.8

20.9

26.7

30.6

2008 2009 2010 2011 2012 2013 2014



Comments

Source:

Pharmaceuticals Market

The Czech OTC pharmaceuticals market reported total revenues of USD 1,121mn in 2013, expanding by a compound annual growth rate (CAGR) of 4% over the period 2009-2013,

Marketline reported. The biggest segment in the sector was traditional medicines, with a share of 31% of the market’s value. Traditional medicines generated total revenues of USD 347.9mn

in 2013. Most of the sector’s products were distributed by pharmacies and drugstores, followed by supermarkets and hypermarkets. The Czech pharmaceuticals market accounted for 2.5%

of the European market in 2013. In 2014 and 2015, the market is estimated to have expanded at higher growth rates.

According to the data provided by the European Federation of Pharmaceutical Industries and Associations, the Czech Republic spent EUR 77mn on R&D related to medicines in 2013, up

from EUR 49mn in the previous year. Thus, there is potential for faster development of the industry in future.

In addition, as of January 2015 the VAT rate on medicines was reduced from 15% to 10%, which should have a positive effect on the consumption of the sector’s products.

Pharmaceuticals Market Segmentation by Value, % Share Market Distribution, % Share

Marketline, European Federation of Pharmaceutical Industries and Associations

Traditional medicines

31.0%

Cough and Cold

Preparations16.2%

Analgesics14.4%

Indigestion Preparations

11.0% Vitamins and Minerals10.7%

Medicated Skin Products

6.9%

Other 9.7%

Pharmacies/dragstores62.6%

Supermarkets/hypermarkets

17.7%

Independent Retailers 9.0%

Specialist Retailers 5.4%

Other 5.3%



Source:

Apparel Retail Market

Apparel Retail Market’s Revenues, CZK bn

Apparel Retail Industry Distribution, % Share

Apparel Retail Industry Segmentation, % Share

Comments

Marketline

The retail revenues from apparel sales rose by 3.8% y/y to CZK

49.5bn in 2013. The market has reported growth in the years

after the crisis and is expected to continue to expand in the

following years, to reach USD 3bn in 2018. Apparel retailing in

the Czech Republic accounted for 0.6% of the total European

market.

Most of the revenues were generated in the women’s wear

segment, followed by men’s wear.

More than 50% of the segment’s products were distributed by

clothing and footwear shops in 2013.

45.6

45.7

45.9

47.7

49.5

0.2%

0.4%

3.9%

3.8%

2009 2010 2011 2012 2013

Apparel Retail Market Revenues, CZK bn y/y change, %

Womenswear52.0%

Menswear32.5%

Childrenswear15.5%

Clothing, foot/sportswea

r & accessories

56.7%

Department stores 21.4%

Hypermarkets, supermarkets

and discounters

20.1%

Discount, variety and

general merchandise

1.2%Other 0.7%



Source:

Furniture Market

Exports and Imports, CZK bn Trade Balance, CZK bn

Statistics office – External Trade Database

44.1

39.5

43.8 47

.6

48.7

58.8

72.5

26.5

25.2

23.9 25

.8 27.8

32.1

41.9

2008 2009 2010 2011 2012 2013 2014

Exports of Furnitures, and parts thereof

Imports of Furnitures, and parts thereof

3.7

2.7

2.4

0.8

1.4

2.8

7.5

2008 2009 2010 2011 2012 2013 2014

Trade Balance



IV. Wholesale Trade, Except of Motor Vehicles Sub-Sector



Wholesale Trade Highlights

Importance

Wholesale trade sales increased by 1.7% y/y to CZK 2,235bn in 2014, following a decline of 0.5% y/y in the previous

year. The sub-sector’s sales accounted for 62.1% of total trade sector sales in 2014. The output of the sub-sector

reached CZK 450bn in 2014, up 7% y/y, accounting for 56.4% of the sector’s output. Wholesaling reported a trade

margin of 12.3% in 2014, much lower than the margin of over 23% registered by retail trade (excluding motor

vehicles and motorcycles).

Employment

The average registered number of employees in the sub-sector has increased over the last three years and reached

213,738 persons in 2014, up by 2.6% y/y. It accounted for 42.8% of total trade sector employees.

Companies tried to cut the average monthly gross wage in order to optimise labour costs. The average monthly

gross wage in the sub-sector fell to CZK 27,866 in 2014, down from CZK 28,219 in 2012. It corresponded to 122%

of the total trade sector’s average wage for the year.



Source:

Key Indicators

Average Number of Employees, Persons

Sales, CZK mn

Average Monthly Gross Wage, CZK

Output and Value Added, CZK mn

Statistics office

204,

970

207,

565

209,

035

211,

520

208,

641

208,

901

209,

374

209,

947

212,

578

214,

432

215,

591

216,

349


2012 2013 2014

27,2

61

26,9

98

27,1

04

31,4

48

26,7

26

26,9

06

26,7

27

28,8

02

27,3

47

27,6

80

27,2

36

29,1

87


2012 2013 2014


515,

420 55

3,13

0

555,

272 58

4,93

3

503,

733

548,

574

560,

733

583,

941

511,

215

563,

063

571,

447

588,

818


2012 2013 2014

94,2

01

104,

458

102,

704

121,

173

93,0

62

103,

370

105,

007

118,

779

101,

042

110,

715

113,

575

124,

213

41,1

82

45,0

69

42,0

95

47,1

38

39,7

52

43,0

71

43,2

85

47,6

11

42,4

18

45,1

94

47,1

98

48,9

04


2012 2013 2014

Outputs, incl. trade margin Value added



V. Motor Vehicles and Motorcycles



Wholesale and Retail Trade of Motor Vehicles Highlights

Importance

The automotive sector, being one of the main sectors in the economy, is an important driver for the development of

other sectors, such as wholesale and retail trade in, and repair of, motor vehicles and motorcycles.

The automotive sector is one of the Czech Republic’s dynamic sectors. Producing about 20% of industrial output, its

development is related to the overall economic development of the country. The economic crisis in the country in

2012 and 2013 led to corresponding declines in sector performance (by 1.7% and 3.9% y/y respectively). However,

in 2014 the situation improved as a result of the government’s austerity measures, aimed at stabilising the fiscal

state of the country, and the monetary authorities’ policy of maintaining inflation within target ranges under the

inflation-targeting monetary regime. Total vehicle production rose by a significant 10.6% y/y to 1.278 million in 2014,

which is the highest in the country’s history both as an independent state and as part of Czechoslovakia. Car

ownership in the country stood at an average of 516 cars per 1,000 people in 2013, which is above Europe’s

average of 451, according to the OICA’s data.

Automotive

Sector

Wholesale and retail trade in motor vehicles and motorcycles employed 10.9% of the total number of employees in

the trade sector in 2014 and generated 11.3% of its total output. The average number of employees has declined

significantly since the global financial crisis of 2008, which may be explicable by restructuring of the sub-sector’s

enterprises. The average number of employees shrank in 2014 by 1.5% y/y, to 54,725 persons.

The sub-sector’s average monthly gross wage, which stood at CZK 23,146 in 2014, was 1.2% above the average

monthly gross wage of the trade sector as a whole.



Comments

Source:

Local Sales

Domestic sales increased by 16.2% in 2014, outpacing the growth rate of production. The rise in domestic sales was due to a growth in new contracts,

which rose by 23.9% year-on-year. The leader in domestic sales was the Czech firm Skoda, although its share decreased from 93.1% in 2009 to 84.2% in

2014. South Korea’s Hyundai gained ground, reaching a market share of 15.3% in 2014, up from 5.5% in 2009. Electric and hybrid cars accounted for

0.3% of the total car sales in the Czech Republic in 2014, which is below the EU average of 0.76%. However, sales of electric and hybrid cars rose by 23%

(to 588 units) in that year. Electric car registration per 1mn people in the Czech Republic stands at 55, while in the EU and EFTA it is 194 cars per 1mn

people.

Local Sales, Units Local Sales by Manufacturer, Units

Automotive Industry Association, OICA, Czech Statistics Office

64,4

50

66,3

96

71,3

44

71,7

06

83,3

49

6.2%

3.0%

7.5%

0.5%

16.2%

2010 2011 2012 2013 2014

Local Sales y/y change, %

58,033 58,202 59,674 60,04270,200

853 909 1,180 764

4365,510 7,28210,479 10,900

12,71354 3

11 0

0

64,450 66,39671,344 71,706

83,349

-10,000

10,000

30,000

50,000

70,000

90,000

110,000

2010 2011 2012 2013 2014

Kaipan HyundaiToyota, Peugeot, Citroen SkodaLocal Sales



Comments

Source:

Registrations

Light vehicle registrations rose by 7.7% in 2014 to 332,889, which was faster growth rate than in any of the preceding five years. New registrations of

passenger cars and light commercial vehicles (LCVs) accounted for most light vehicles registrations. The increase may be partially attributed to a “low base

effect”, since there had been a drop in registrations in the previous two years. In January 2013, the government had increased the VAT rate by 1pps to

21% as part of its temporary consolidation package. The increased VAT rate initially discouraged Czechs from buying cars. According to a survey carried

out by the local market research agency STEM/MARK, local citizens use their savings to buy cars, especially used cars from domestic vendors. The survey

showed that the main criterion for purchasing a car is its price (71% of respondents), followed by the state of the vehicle (62%).

Passenger Cars, Units Light Commercial Vehicles, Units

Automotive Industry Association, European Commission, Car Importers Association

161,659 169,236 173,282 174,009 164,736192,314

144,602 127,034 131,707 124,343 126,115

120,408

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2009 2010 2011 2012 2013 2014

Used Vehicles New Vehicles

19,427

11,57613,269 11,821 11,669 13,165

8,337

7,4707,286

6,384 6,6287,002

0

5,000

10,000

15,000

20,000

25,000

30,000

2009 2010 2011 2012 2013 2014

Used Vehicles New Vehicles



Source:

Comments

Passenger Car Registrations

New passenger car registrations rose by 16.7% in 2014 to 192,314 units, accounting for 61.5% of all passenger car registrations. Most of the new

registrations were for lower medium-class cars, which held a market share of 26.34%. Next came small and medium cars at 21.36%, followed by SUVs and

crossovers with 16.89%. Luxury class cars accounted for the smallest share, with just 0.3%. In terms of the type of fuel used, the share of new passenger

cars with diesel engines dropped to 41.67%, while that of passenger cars with petrol engines increased to 55.53%.

Passenger Cars, First Registrations, Units

Automotive Industry Association, Car Importers Association

2012 2013 2014

New Registration Market Share New Registration Market Share New Registration Market Share

Skoda 53,778 30.9% 49,971 30.3% 58,091 30.2%

Hyunda 15,162 8.7% 16,239 9.9% 18,934 9.8%

Volkswagen 15,185 8.7% 14,948 9.1% 18,281 9.5%

Ford 12,719 7.3% 9,460 5.7% 12,576 6.5%

Peugeot 6,725 3.9% 7,252 4.4% 7,175 3.7%

Kia 8,564 4.9% 6,325 3.8% 6,701 3.5%

Renault 10,456 6.0% 6,047 3.7% 6,314 3.3%

Citroen 5,711 3.3% 5,981 3.6% 5,445 2.8%

Dacia 3,805 2.2% 5,655 3.4% 9,280 4.8%

Opel 3,836 2.2% 4,448 2.7% 6,908 3.6%

Seat 2,680 1.5% 4,360 2.6% 6,163 3.2%

Toyota 3,951 2.3% 4,173 2.5% 4,009 2.1%

BMW 3,901 2.2% 3,730 2.3% 4,530 2.4%

Audi 3,810 2.2% 3,289 2.0% 3,935 2.0%

Mercedes-Benz 3,236 1.9% 3,168 1.9% 3,863 2.0%

Others 20,490 11.8% 19,690 12.0% 20,109 10.5%

Total 174,009 164,736 192,314



Source:

Comments

Light Commercial Vehicle Registrations

New light commercial vehicle registrations accounted for 65.3% of the total light commercial vehicle registrations in 2014. New LCV registrations rose by

12.8% year-on-year to 13,165 units in 2014. Most of the new LCVs were in categories up to 3.5 tonnes (53.44%), the share of the category “up to 3 tonnes”

being 33.68%. In terms of fuel used, the share of LCVs with diesel engines was 89.32%, while the share of those with petrol engines was 5.35%.

Light Commercial Vehicles, First Registrations, Units

Automotive Industry Association, Car Importers Association

2012 2013 2014

New Registration Market Share New Registration Market Share New Registration Market Share

Fiat 1,654 14.0% 1,989 17.0% 2,037 15.5%

Peugeot 1,133 9.6% 1,632 14.0% 1,431 10.9%

Volkswagen 2,077 17.6% 1,606 13.8% 1,631 12.4%

Ford 1,783 15.1% 1,545 13.2% 1,826 13.9%

Renault 1,204 10.2% 1,104 9.5% 1,320 10.0%

Citroen 1,010 8.5% 928 8.0% 1,127 8.6%

Mercedes-Benz 815 6.9% 913 7.8% 1,152 8.8%

Iveco 517 4.4% 550 4.7% 631 4.8%

Toyota 271 2.3% 260 2.2% 309 2.3%

Opel 157 1.3% 247 2.1% 349 2.7%

Dacia 305 2.6% 219 1.9% 499 3.8%

Skoda 276 2.3% 144 1.2% 255 1.9%

Nissan 129 1.1% 84 0.7% 97 0.7%

Multicar 31 0.3% 75 0.6% 138 1.0%

Hyundai 61 0.5% 60 0.5% 27 0.2%

Others 398 3.4% 313 2.7% 336 2.6%

Total 11,821 11,669 13,165



Comments

Source:

Employment and Wages

The average registered number of employees in the sub-sector has shown significant declines in the last few years, especially after the global

financial crisis of 2008. The average number of employees reached 54,725 persons in 2014, down by 1.5% y/y. At the same time, companies

increased the average monthly gross wage to CZK 23,146 in 2014, from CZK 22,221 in 2012. Wages in this sub-sector are higher than in

others because more qualified workers are employed in it.

Average Number of Employees, Persons Average Monthly Gross Wage, CZK

Statistics office

57,633

57,553

57,509

57,069

55,905

55,856

55,404

55,137

54,812

54,743

54,676

54,670


2012 2013 2014

Average registered number of employees (actual persons)21,703

22,078

21,743

23,369

21,711

22,371

22,601

23,335

22,272

23,185

23,080

24,048


2012 2013 2014




VI. E-Commerce



E-Commerce Highlights

E-commerce has been the fastest growing segment of the Czech retail sector. In 2013, it generated 1.4% of GDP with a turnover of

EUR 2.1bn, up by 16% y/y. The Czech Republic ranked fifth among the Central European countries by e-commerce turnover.

E-Commerce

Online Retail

Internet Retailers

Outlook

Online retail sales have also developed very fast due to technological and social factors. Increasing incomes, decreasing incomeinequality, the growing number of households with computers, and increased internet penetration have together produced a shift in consumer behaviour in favour of online sales. They accounted for 5.5% of total retail sales in 2013. The number of e-shoppers reached 3.5 million in 2013. Internet access in the Czech Republic was among the highest in Central Europe, at 76% in 2013, which was above the penetration in, for example, Poland (65%), Hungary (74%) and Slovenia (74%).

Internet retailers leased over 260,000 sq m of the Czech Republic’s total available warehouse space of 4.9mn sq m in 2014, according

to a report by CBRE. The most attractive locations for the internet retailers were Prague, Brno and Plzen in 2014. The strongest

internet retailers were Amazon, Mall.cz and Alza.cz, which leased a combined 178,000sq m as of end-2014. The high demand for

leased areas among internet retailers can be explained by their need for larger leased premises than traditional retailers – given that

they offer a wider selection of goods and must also have space for supplementary activities such as shipments, distribution, etc.

Internet retailing is expected to maintain its high growth rates in the coming years, driven by technology and changed consumer

behaviour. The segment is anticipated to grow at a CAGR of 8% in sales value (measured at constant 2014 prices) in the period 2015-

2019, according to a forecast by Euromonitor International.



Source:

Central Europe Ranking

Internet Use, %

Internet Purchases by Individuals, % in the Last 12 Months

E-commerce Ranking of Central Europe byTurnover, 2013

Ecommerce Europe, Eurostat

Country Turnover, EUR mn

Germany 63.4

Austria 10.9

Switzerland 10.2

Poland 5.2

Czech Republic 2.1

Hungary 0.8

Slovakia 0.3

Slovenia 0.1

69

7375 76

81

7173

7577

80

2010 2011 2012 2013 2014

Czech Republic EU28

9

5

810

19 18

23 23

2011 2012 2013 2014

Czech Republic EU28



Source:

Internet Retailers

Retail Value Sales, CZK bn Company Shares, %, 2014

Euromonitor International

Alza.cz as 12.9%Internet Mall

as 8.7%

HP Tronic Zlin sro 4.6%

CZC cz sro4.6%

TS Bohemia as 2.2%

MironetTechnology

sro 1.8%

Tesco Stores CR as 1.2%

Others 63.9%

38.741.2

49.0

2012 2013 2014



VII. Major Players



Source:

Top M&A Deals

Top 15 M&A Deals in the Retail Sector in the Czech Republic in (2014-2015 YTD)

DealWatch

Date Target Company Deal Type BuyerCountry of

Buyer

Deal Value

EUR (mn)

Stake

(%)

10-Dec-14 Palladium shopping mall Acquisition Union Investment Real Estate GmbH Germany565

(Market estimate)100.0

14-Oct-14 AAA AUTO Group NV Acquisition Abris Capital Partners Poland220

(Official data)95.0

5-Aug-14138 petrol-filling stations of Lukoil in the Czech

Republic, Hungary and SlovakiaAcquisition

Magyar Olaj- Es Gazipari Nyrt (MOL);

Norm Benzinkut KftHungary

205.63

(Official data)100.0

10-Mar-14 SPAR's business in the Czech Republic Acquisition Ahold Netherlands118.9

(DW estimate)100.0

4-Dec-14 Futurum shopping centre in Ostrava Acquisition Meyer BergmanUnited

Kingdom

87.6


12-May-15 Feedo Acquisition Windeln.de Germany15

(Market estimate)100.0

10-Mar-14 AUTO Heller sro; AH Nemovitosti sro Acquisition Porsche Inter Auto GmbH Austria12.2


26-Jun-14 ASTRID as Acquisition Sarantis Greece6.5


21-Jan-15 Zoot.czMinority stake

purchase3TS Capital Partners

United

Kingdom

5.48

(Official data)

8-Aug-14 Datart International, a.s. Acquisition Datart foundersCzech

Republic

5

(Official data)60.0

25-Nov-14 KOMA Commercial sro Acquisition Brammer PLCUnited

Kingdom

4


8-Aug-14 Datart International, a.s.Minority stake

purchaseHP Invest

Czech

Republic

1.67

(DW estimate)20.0

14-May-15 Auto Adamek spol sro Acquisition TUkas GroupCzech

RepublicNA 100.0

29-Apr-15 Alltoys spol sro Acquisition Petr Homolka - private investorCzech

RepublicNA 100.0

24-Apr-15 Sparkys sro Acquisition Petr Homolka - private investorCzech

RepublicNA 100.0



Source:

M&A Activity, 2013-2014

Number and Value of Deals in Czech Republic’s Retail Sector

Number of Deals by Deal Type (%)

Number of Deals by Deal Value, EUR (%)

Number of Deals by Region of Investors (%)

DealWatch

361

801

0 12 131

7 212

877

5

7

34 4

76 6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014

Total value of deals (EUR mn) Number of Deals

Acquisition90.5%

Minority stake purchase 9.5%

Czech Republic45.2%

Poland 7.1%

Russia 2.4%

United States4.8%

Others 40.5%

0-50mn; 19.0%

Undisclosed; 64.3% 50.1-100mn;

2.4%

100.1-500mn; 9.5%

> 1000mn; 0.0%

500.1-1000; 4.8%



Highlights

Source:

Tesco Stores CR

Sales, GBP mn

Internet Retailing, % Share of Total Company Sales

Tesco Stores CR is active in retail, especially of foods

and beverages. The company is a unit of British retail

giant Tesco, which entered the Czech market in 1996

through the acquisition of six outlets from K-Mart.

Tesco Stores CR offers food and non-food goods –

from fresh and long-lasting foods to family fashion,

sporting equipment, electronics, furniture and toys.

The first Tesco hypermarket in the Czech Republic

was opened in 1998.

In the financial 2014-2015, the sales revenues of

Tesco Stores CR reached GBP 1,175mn (CZK

40.8bn), down by 9.5% year-on-year.

Tesco Stores CR started internet retailing in 2012, by

offering online shopping to consumers in Prague. The

company expanded its online shopping offer to

Central Bohemia later in 2012, to Brno, Hradec

Kralove and Pardubice in 2014 and to Liberec in 2015.

The expansion of Tesco’s online shopping offer to

more cities led to the an increase in the internet

retailing’s share in the total company sales, reaching

1.5% in 2014.

Group’s data, Euromonitor International

1,356

1,298

1,175

2012/13 2013/14 2014/15

Sales, GBP mn

0.60%

1%

1.50%

2012/13 2013/14 2014/15

Internet retailing's % share of total company sales



Highlights

Source:

Tesco Stores CR

Number of Stores, Units

Space, 000 sq ft

As of the end of financial 2014-2015, Tesco Stores CR

operated 209 hypermarkets and supermarkets,

decreasing its number of stores. The expansion of

online shopping could be considered as the main

factor for the optimisation of the company’s retail

network.

In 2014, the company operated several types of retail

chains: 77 Tesco outlets and Tesco Extra stores in the

hypermarkets segment, 63 Tesco outlets in the

supermarkets segment, 55 Tesco express

convenience stores and six Tesco department stores,

according to the data, provided by Euromonitor

International.

Tesco Stores CR is the only chain in the Czech

Republic, offering 24-hour operations in some of its

outlets.

The space of the company’s stores reached 5,653

thousand sq ft at the end of 2014-15, dropping by

0.9% year-on-year.

The company estimated that its outlets space will

reach to 5,572 thousand sq ft at the end of 2015-2016

financial year.

Group’s data, Euromonitor International

234

211209

2012/13 year end 2013/14 year end 2014/15 year end

Store numbers

5,951

5,7045,653

2012/13 year end 2013/14 year end 2014/15 year end

Space, '000 sq ft



Highlights

Source:

Ahold Czech Republic

Net Sales, EUR mn

Underlying Operating Income, EUR mn

Ahold is an international retailing group based in the

Netherlands and active in the United States and Europe,

including the Czech Republic.

Ahold Czech Republic is a subsidiary of Royal Ahold NV.

The company was established in 1991. In 2005, it moved to

a new administrative building in Prague 5 Nove Butovice.

In 2014, Ahold Czech Republic was ranked third in the

retail sector in the country, with a market share of 5% by

value, according to Euromonitor International.

The company is expected to become the leading player in

the grocery retail sector as it acquired Interspar/Spar from

Internationale Spar Centrale in the second half of 2014.

Ahold’s brand in the Czech Republic is Albert.

The company’s net sales rose by 5.3% year-on-year to

EUR 1.5bm in 2014. The increased its net sales was mainly

due to the integration of 49 acquired SPAR stores, of which

all 14 supermarkets were rebranded to the Albert brand.

Underlying operating income in the Czech Republic

reached EUR 19mn, down by EUR 11mn year-on-year, due

to the SPAR acquisition, which had a negative impact on

underlying operating income.

Underlying operating profit margin was 1.2% in 2014, down

by 0.9pps year-on-year. Underlying operating profit margin

was 2.3%, or up 0.2pps year-on-year after excluding SPAR

acquisition effects.

Company’s data, Euromonitor International

1,51

6

1,44

5

1,52

1

4.70%

4.40%

4.60%

2012 2013 2014

Net Sales (EUR mn) Contribution to Group Net Sales, %

27

30

19

1.80%

2.10%

1.20%

2012 2013 2014

Underlying Operating Income, EUR mn

Underlying Operating Profit Margin, %



Highlights

Source:

Ahold Czech Republic

Number of Stores, Units

Sales Area of Own-Operated Stores, sq meters

Ahold Czech Republic has two grocery channels -

hypermarkets and supermarkets.

In 2011, the company started a project, aimed to

update all company’s hypermarkets to a new compact

format.

At the end of 2014, Albert operated 333 stores in the

Czech Republic, 91 of which were compact

hypermarkets, and 242 supermarkets.

In 2014, the Ahold Czech Republic focused on the

integration of the 49 stores following the acquisition of

the SPAR business in the second half of 2014,

including the successful re-branding of 14 SPAR

supermarkets and one hypermarket into the Albert

brand.

In 2014, the company also renovated 15 Albert stores

in part as a result of the continuation of its strategy to

update its hypermarkets.

Company’s data

280 282 284

333

2011 2012 2013 2014

Number of stores, Units

391 393

550

2012 2013 2014

Sales area of own-operated stores (in thousands of square meters)



Highlights

Source:

Kaufland Ceska Republika

Net Sales, CZK mn

Outlets, Units

Kaufland entered the Czech Republic market in 1997, when it acquired Bremke and Hoester stores. The first Kaufland hypermarket was opened in 1998.

Kaufland is a part of the German retail group Schwarz Gruppe.

As of the end of 2014, Kaufland operated 119 outlets in the Czech Republic, increasing their number by five outlets year-on-year.

Kaufland Ceska Republika continued to modernise its existing stores by concentrating on the modernisation of the shopping environment, new design as well as enlargement of the selling space.

As of the end of 2014, the selling space of the company reached 470.8 thousands sq m.

Kaufland Ceska Republika employed about 10,880 workers as of the end of 2014.

Kaufland expanded the most significantly among all international food chains in the Czech Republic in 2014, according to information provided by the Czech Information Agency (CIA).

Retail chain Kaufland offers over 1,500 types of goods under its private brand, CIA news agency reported. Private brands accounted for about 15% of the firm's revenue in 2013.

Euromonitor International, Company data, Czech Information Agency (CIA)

44,468

47,905

50,709

2012 2013 2014

Net sales, CZK mn

106

114

119

2012 2013 2014

Outlets



Highlights

Source:

Penny Market

Net Sales, CZK mn

Outlets, Units

Penny Market is discount retail chain. The company

offers over 1,500 products, focusing on a wide range

of grocery products.

Penny Market Czech Republic was established in

1996. The company opened its first store in the

country in 1997.

Penny Market is a unit of Austrian retailer Rewe

Group.

In 2014, Penny Market operated 351 outlets in the

Czech Republic with a total selling space of 243.7

thousands sq m in, according to the Euromonitor

International’s report.

As of the end of 2014, the company employed about

5,145 workers, up by 0.7% year-on-year.

Penny Market and Kaufland expanded the most

significantly among all international food chains in the

Czech Republic in 2014, according to an information

provided by the Czech Information Agency (CIA).


344

348

351

2012 2013 2014

Outlets

28,749

29,854

31,678

2012 2013 2014

Net Sales, CZK mn



Highlights

Source:

Billa

Net Sales, CZK mn

Outlets, Units

Austrian grocery chain Billa entered the market in the

Czech Republic in 1990 and opened its first store in

the country in 1991. The company expanded rapidly in

the years after its entry on the market.

Billa is a unit of Austrian retailer Rewe Group.

In 2014, Billa operated 207 outlets. The company

expanded over the past years due to the takeover of

several brands. In 2008 Rewe group acquired Plus

Diskont and in 2007 took over Delvita.

In June 2014, the company implemented a new

strategy of opening small Billa stop and shop outlets

at the petrol stations of Shell. In 2014, the company

opened five new shops.

Czech products accounted for about 70% of Billa

stores' assortment, CIA news agency reported. The

retailer plans to increase the share of Czech products

to 75% by the end of 2015, the agency reported,

quoting Billa PR manager Lucie Borovivkova as

saying.


20,11720,185

20,680

2012 2013 2014

Net sales, CZK mn

205

206

207

2012 2013 2014

Outlets



Contact:

Corporate Headquarters

Nestor House

Playhouse Yard

London EC4V 5EX

UK

Voice: +44 207 779 8471

Fax: +44 207 779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness

of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. A Euromoney Institutional Investor company.

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