Carrefour checks out of China
Supermarket group Carrefour is selling an 80% stake in its Chinese division, after trying various tactics to bolster its performance.
French supermarket group Carrefour (Paris: CA) is "unloading" most of its operations in China, says Julie Wernau in The Wall Street Journal. After trying various tactics to bolster its performance, it has opted to sell an 80% stake in its Chinese division, comprising more than 200 stores, to local retailer Suning.com Co. for $700m. Carrefour's Chinese sales fell by 5.9% to €4.1bn last year. A key problem has been that "big-box retailers are struggling to keep up with nimble delivery providers that are winning over shoppers".
Bricks and mortar stores are facing competition from internet retailers too, says Nisha Gopalan on Bloomberg, with one-fifth of all retail sales taking place online. Meanwhile, China's economy is slowing and "foreign brands no longer have the cachet they once enjoyed at least in low-end consumer goods", a problem exacerbated by the "nationalistic fervour" generated by the trade war with America. Carrefour is "unlikely to be the last" company to pull back from China.
It is actually getting quite a "decent" price for its Chinese operations, especially when you take into account that the business has struggled, says Christopher Beddor for Breaking Views. Indeed, the Suning agreement values the total package at more than 21 times the €66m in operating profits its China operations generated last year. This is far higher than Carrefour's ratio of seven times. Carrefour's decision to retain a 20% stake also gives it "potential upside" if Suning can turn Carrefour's hypermarkets around. This "isn't a bad way to go out".