Corporate

Message of the Chairman


Honored partners,

Economic And Sectoral Assessment

The possibility of interest rate hikes to reflect improvements in the global economic outlook was on the agenda of many of the world’s developed countries last year, but now we’re talking about interest rate cuts once again due to worries about growth. This could create new opportunities from the standpoint of capital flows tp the developing countries including Turkey. Inflation, interest, exchange, and growth rates have become more predictable and credit costs have fallen in our country. This is beneficial to the private sector’s investment plans. The impact of such positive developments on employment too will be another issue that will need to be closely watched in the period ahead.

Strategies and Operational Performance

Looking back at the company’s performance last year we see that Migros’ growth was strong in 2019. The company’s sales were up by 23.9% year-on-year and its consolidated sales reached TL 23.2 billion. Its consolidated operating profit improved as compared with the previous year while its consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) topped TL 1.5 billion, (or more than TL 2.2 billion with IFRS 16). The EBITDA margin was 6.6% (9.6% with IFRS 16). Migros continued to generate strong cashflow from its operations last year and these resources improved as compared with the previous year. Despite its strong operational performance however, the Company booked a 2019 consolidated net loss of TL 492 million owing mainly to the surge in exchange rates, which pushed up financing costs.

Our country’s food retailing sector continued to grow last year. As consumers’ disposable income increases so too will the size of their food spend. Migros itself is continuing to grow and every year it creates thousands of new job opportunities. Our investments last year amounted to TL 341 million in value and we added another 137 new stores to our store portfolio. With the inclusion of our international operations, the total number of stores in our company’s portfolio reaches 2,198. That said, we are engaged in a highly competitive sector–a sector in which many new stores are being opened–but even in this competitive environment, Migros is also gaining market share. Let me also note that over the last three years, Migros has increased its turnover by 110% and we have been achieving that growth by attracting more customers into our stores and by improving the performance of our online operations.

The “Migros Good Future Plan”

Honored partners, what our customers eat is important to us. For this reason, we strive year after year to keep our customers’ tables supplied with wholesome, healthy foods. Thanks to the fresh food-specific distribution centers that we’ve been opening in the course of the last few years, we not only have increased productivity but we are also supplying fresher foods to our customers faster. You will recall the project on which we worked with the agriculture ministry a couple of years ago and the ensuing introduction of good agricultural practices to ensure the wholesomeness of fresh fruits and vegetables when they reach consumers by having produce quality checked against hundreds of control points. We subsequently extended the scope of those practices to include red and poultry meat products as well.

Esteemed stakeholders, at Migros we believe that while striving to manage our business more productively, everything that we do out of our sense of responsibility to society and the world will make those efforts more successful. For this reason we have gathered together all of the issues on which we focus under the heading of “sustainability” and we have incorporated them into our “Migros Good Future plan”, which sets out our strategies for dealing with a wide range of issues from climate change and combatting it to waste management and from the most effective use of Company resources to innovative practices. We are particularly mindful about managing ourtransportation costs, making effective and productive use of water and energy, and measuring and reducing our carbon footprint. Put briefly, we quantify the environmental impact of our operations all along our value-creation chain and take measures in line with set targets to minimize that impact. It is through such sustainability efforts that Migros is able to continue growing soundly and generate operational profitability. It is through the same efforts that we are able to make certain that our success remains sustainable in the future as well.

Expectations for the future

The issues on which our company will be focusing in the near and medium terms will be growth and increasing the amount of cash flow being generated by our operations. We are going to be opening new stores. We are going to be creating new jobs. Another issue to which we will be giving close attention will be further reducing the company’s euro-denominated debt. In the period ahead we are going to be working even more productively, keeping our costs in check, and achieving the things we set out to do. Just as we succeeded in doubling our sales over the last three years, so too will we be coming before you with even stronger growth figures in the years ahead. Very truly yours,

Very truly yours,

Tuncay Özilhan

Chairman of the Board of Directors

Migros Ticaret A.Ş.

Message of the CEO


Valued Migros stakeholders:

Migros and its Sector

Efforts to rebalance Turkey’s economy began to take effect last year. This was especially to be seen in the second half of 2019 as the Turkish lira began to stabilize against other countries’ currencies, financial market volatility and turbulence subsided noticeably, and an improved outlook allowed lowering the interest rates. In the food retailing sector, the rise in costs eased, which impacted favorably on product prices and fostered a climate of cautious confidence that helped reducing the inflation. Looking at the demand conditions now prevailing in the early months of 2020, it would appear that the positive developments witnessed in 2019 have led to a moderate recovery in our sector.

Financial & Operational Performance

Honored partners, last year we continued to undertake investments aimed at expanding and developing our physical presence in the retailing industry. We also invested in renovations at our existing stores in order to give our customers a more enjoyable shopping experience. We not only increased the stores’ square-meter sales productivity thanks to these renovations but also made progress in the direction of better managing such operational costs such as energy expenses. Such efforts are quite in keeping with our fundamental approach to sustainable merchandising of course and, by helping to reduce our operational carbon footprint, they add to our reputation as a responsible retailer.


Last year we opened 137 new stores and spent TL 341 million on investments. In that respect Migros continued to grow both by improving the sales performance of its existing stores and by adding new stores to its chain. With the inclusion of our operations abroad, the number of our company’s stores reached 2,198 in 2019.

Migros’ consolidated sales rose to TL 23.2 billion in 2019. Last year we also focused even more intently on improving operational profitability. The company’s consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) were over TL 1.5 billion: (TL 2.2 billion with IFRS 16). EBITDA margin also improved by 10 percentage points and weighed in at 6.6% (9.6% with IFRS 16). Despite higher unit costs, we succeeded in keeping our operational expenses under control. However, the euro’s rise against the Turkish lira increased our exchange rate losses and financing costs, with the result that the company booked a TL 492 million consolidated net loss in 2019. Last year however we also succeeded in reducing the company’s euro-based debt by 30%, which will make it possible to manage the company’s balance sheet better in the period ahead.

Esteemed stakeholders at this point there is a matter that I should especially draw your attention to: the ability of Migros to generate strong cash flow from its operations even under challenging economic conditions. By continuing to focus on sustainable growth, our company will also continue to make its presence felt and its voice heard as the retailing sector continues to evolve.

Agriculture is Our Future

Esteemed stakeholders, we continue our efforts to supply our customers with fresh and healthy foods. Of course, we recognize that our efforts to do so are blessed by geography: the peerless value of Anatolia’s soil has made it the home of many civilizations in the course of millennia. The soil amidst which we dwell makes it one of the biggest farms in the world, a farm capable of nourishing people who are both hardworking and productive. We all have a responsibility to make sure that such richness gets passed on to our children and, through them, into the future. It is with this in mind therefore that gives me great pleasure and satisfaction to tell you here that we have joined hands with the Ministry of Agriculture and Forestry in a project to seek out heirloom crops that are native to our country and introduce them to our customers. Some of these are traditional fruits and vegetables that have almost been forgotten. Under this project we are not only fulfilling our responsibilities to our country’s soil but also creating value by supporting local farmers who grow these crops, providing them with education and training on how to increase their output, and guaranteeing to purchase what they produce.

Beyond The Numbers

Turning now to another issue, we know that when attempting to respond to rapidly-changing consumer expectations in the intensely-competitive business of food retailing, we can never survive if we just keep doing the same things. We must grow and develop and we must therefore manage change. This is why our strategy of focusing on e-commerce is so important. Last year we introduced our “Migros Hemen” app.

Orders placed by customers using the app can be fulfilled and delivered to addresses in big cities within half an hour. We are now working hard to expand the scope of this service. This year, we intend to increase the number of provinces served by Migros Sanal Market to 81, which will give us complete coverage of our entire country.

Our e-commerce investments are just one dimension of our efforts to be closer to our customers and to manage change. We are also seeking out and implementing other ways to set ourselves apart from competitors by making effective use of technology in the conduct of our business processes: intelligent systems that automatically respond to customers’ calls through WhatsApp, checkout counter payment options that allow customers to pay for purchases without the need for cash or cards, the ability to transfer sums of money through Migros stores without the need for bank accounts, the ability to pay bills for more than 170 utility and other companies through Migros cash registers, and the integration of Istanbulkart (a contactless smart card for fare payments on public transport in İstanbul) with Migros’ Money Card loyalty program are just a few of the innovations that we have been introducing. We have now reached the point where we are making use of autonomous robots to keep track of sales and inventory in our stores. In the near future, we will also be appearing before you with new services and new applications capable of making our customers’ lives easier.

Honored partners, today we are making every possible effort to reduce all our food product procurement costs (especially in the fresh produce category), to improve our logistical processes, and to offer our customers the most economically-priced products possible. Today we have the ability to compete by offering the lowest product prices available in Turkey. At the same time we are also constantly improving the quality and scope of Migros’ products and services. We recognize supermarket operations as our core business activity and we continue to embrace them as such.

But to go beyond what numbers tell us I want to say that we are also focusing on sustainable strategies that will ensure Migros’ success in the future as well. We are developing new products and services that will support our core business activity and, perhaps in the future, even become additional business lines. We are spending time planning the future. We believe that these efforts will lead to successes that go beyond today’s numbers and ultimately to better numbers. As we move forward, we have confidence in our employees: passionate as they are about what they do, our employees never cease searching for something new, coming up with something better, or wanting to do something more.

Building upon Migros’ existing successes, we sense your never-ending support as Migros advances into the future.

Very truly yours,

Ö. Özgür TORT

Board Member & CEO

Migros Ticaret A.Ş.