Carrefour to add stores in China and Thailand

Carrefour to add stores in China and Thailand

Laurent Malespine and Jianguo Jiang, Bloomberg/Bangkok/Shanghai

Carrefour SA, the world's biggest retailer after Wal-Mart Stores Inc., plans to increase revenue from Asia by adding stores in China and Thailand as sales in the French company's home market slow.

"Asia is our real engine of growth," Carrefour Chief Executive Jose Luis Duran, 40, said yesterday in Bangkok, where he headed a French delegation aimed at boosting trade with Thailand. "The only thing I can anticipate is probably half of the new stores to be opened in 2005 and 2006 are going to come in Asia," he said.

Asia makes up 7 percent of revenue at Paris-based Carrefour, which has about 10,000 stores on three continents. Second-half profit fell 23 percent to 853 million euro (US$1.14 billion), partly because of writedowns in Japan, where Carrefour is selling its stores after failing to make them profitable.

"We are not going to exit any other market in Asia," Duran said. "We are No. 1 in Taiwan, in China, in Indonesia."

Soaring economic growth, particularly in China, is boosting incomes and allowing people to eat better and buy pricier imported goods. China's economic growth reached 9.5 percent last year. Per capita disposable incomes in urban areas, home to a third of the nation's 1.3 billion people, rose 7.7 percent in real terms to 9,422 yuan ($1,138) last year.

Carrefour's commitment to Asia "is good news," said Guy Francheteau, an analyst at Paris-based Fideuram Wargny. "In China, they are expanding, and the growth potential is obvious."

Carrefour's sales in China last year rose 20.9 percent to 16.2 billion yuan after the company increased outlets to 62 from 41, China's Commerce Ministry said on its Website on Feb. 7.

Carrefour, which opened 15 hypermarkets last year in China, plans to open a similar number this year in the mainland, adding about 200,000 square meters of sales area, Duran said.

"We are pretty happy with how we are developing" in China, he said.

Overall retail sales in China sales climbed 13.6 percent in the first two months of 2005 as rising incomes spurred spending in the world's most-populous nation.

Rising spending is prompting companies including LVMH Moet Hennessy Louis Vuitton SA and Wumart Stores Inc. to expand in China, helping sustain economic growth amid a government clampdown on investment in industries including real estate, autos and steel. Premier Wen Jiabao said March 5 the government will lower taxes to help boost local demand this year.

In Thailand, Carrefour ranks No. 4 with 20 stores, after Tesco Plc, the largest U.K. food retailer, and Big C Supercenter Pcl, the Thai unit of Casino Perrachon SA of France.

"We are opening around three to four new hypermarkets a year," Duran said. "The target is to reinforce our investments in Thailand. If we could open more, we are going to open all what can be approved by the government."

Tesco has 49 hypermarkets, each spanning as much as 12,000 square meters, 16 smaller supermarkets and 50 convenience stores. Big C plans to spend 3 billion baht ($77 million) this year to add four stores for a total of 44, Chief Financial Officer Rumpa Kumhomruen said March 9.

Fideuram Wargny's Francheteau said Carrefour needs to enter Russia and spread its focus to India. Russia's $533 billion economy is expanding in 2005 for a seventh straight year amid higher prices for oil, the nation's major export commodity. Russian retail sales rose 12.1 percent in 2004 from 2003, compared with an 8.4 percent increase in the previous year.

A Merrill Lynch & Co. report in August forecast India's $470 billion economy will double by 2010 as companies such as General Electric Co. and Accenture Ltd. hire from a pool of young educated workers, creating a new generation of spenders.

In France, Carrefour said it will concentrate on reviving stores in that country and in Europe after price cuts failed to halt a drop in market share to the benefit of competitors such as E. Leclerc.

Carrefour, like German retailer KarstadtQuelle AG, has suffered as consumer spending in Europe has stagnated, hurt by an unemployment rate of 8.8 percent. Retail sales in the dozen nations sharing the euro fell by the most in February, the Bloomberg purchasing managers index showed.

France's, "food consumption has not been at its best in 2004," Duran said. "I don't expect, I would say, a very positive change in the trend for 2005."

The market share of Carrefour's superstores in France fell to 13.3 percent in 2004 from 13.5 in 2003, the fifth straight decline, according to Chicago-based Information Resources Inc. Leclerc increased its share to 17.4 percent in 2003 from 17.1 percent three years earlier.