Retail titan Cencosud S.A. keeps growing aggressively through organic means along with strategic acquisitions and thus embarking on a spending spree unprecedented in the history of retail establishments in Latin America. Moreover, beginning in the early 1970s at a small restaurant his family transformed into a grocery store in Temuco, Chile while renaming it as “Las Brisas” after waitering tables at a country club catering to German expatriates, the founder and German immigrant in Chile Horst Paulmann Kemna came up with the idea of a hypermarket format passing savings from sizable purchasing of goods on to consumers and that was his breakthrough in retail allowing him to expand rapidly along the narrow nation. From this point in time, he grew the chain of hypermarkets known as “Jumbo” in the 1980s and began engaging in an aggressive acquisition spree using the cash flow from “Jumbo” as well as leverage to position the retail group on top of the industry in Chile. Since then, after reaching Argentina first in the 1990s through the purchase of Supermercados Disco S.A. from Dutch multinational Royal Ahold N.V. while adding 250 grocery stores in the neighboring country, the appetite of Horst Paulmann Kemna to keep on swallowing prays has not ceased and although heavily indebted, the retail giant is expected to surpass $ 20 billion in sales this year and likewise reporting profits of some half a billion dollars this year as well. Altogether, the company today has a portfolio of around 1,000 grocery stores including the “Jumbo” banner and hypermarket format in various countries throughout South America, approximately 50 department stores, nearly 100 home-improvement supply stores, a commercial bank, an insurance company, 14 indoor malls, 16 strip malls and the largest office, hotel and retail complex development in Latin America containing the tallest skyscraper in the subcontinent known as “Costanera Center” and located in Greater Santiago, Chile. In fact, the massive company having gone public back in 2004 while trading here in the US as an ADR on the NYSE, under the ticker symbol (CNCO), has a solid presence in Chile, Argentina, Peru, Colombia and Brazil where it owns 300 grocery stores thanks to the purchase of five supermarket chains there in the last handful years. Just recently, the group bought a supermarket chain in Colombia from French multinational Carrefour S.A. while adding 100 grocery stores there all at once. In addition, although heavily indebted, once the cash flow from operations enables the debt load to shrink, the group is expected to increase profits substantially throughout the immediate years to come. Currently, the company fetches $ 15 billion in market value while trading at a steep 30 times earnings but then again, profits at the retail giant are expected to increase substantially in years to come once the cash flow from operations gains speed amortizing the mountain of debt.
To conclude, Cencosud is a powerful titan from Chile trading at a steep premium but that premium is fully justified by the fundamentals the massive growing company, with a workforce containing around 140,000 employees, possesses. Similarly, German-Chilean billionaire magnate Horst Paulmann Kemna has done a great job optimistically growing the portfolio of banners and stores while making astute use of leverage without endangering the ability of the company to service the heavy pile of debt. Accordingly, this is a true business success story and quite an outstanding self-made and aggressive entrepreneur who made it big and entirely from scratch in Latin America.