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.

A pedestrian walks past a Carrefour SA supermarket in Shanghai, China

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".

Recommended

Stockmarkets have a spring in their step
Stockmarkets

Stockmarkets have a spring in their step

Global stockmarkets have been basking in the post-Covid economic recovery as GDP, retail sales and manufacturing are all on the way back up.
23 Apr 2021
Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
US stocks look expensive – here’s what to own instead
Investment strategy

US stocks look expensive – here’s what to own instead

Right now, US stocks are among the most expensive in the world. So if you want a decent return on your investments, you should look into diversifying …
17 May 2021
Cinema stocks: a happy ending at the box office
Share tips

Cinema stocks: a happy ending at the box office

Cinemas have been battered by lockdowns and the surge in streaming options. But don’t write them off, says Tim Dams
17 May 2021

Most Popular

How will Joe Biden’s capital gains tax rise affect crypto prices?
Bitcoin & crypto

How will Joe Biden’s capital gains tax rise affect crypto prices?

The US president wants to increase capital gains tax – and that’s going to hit a lot of American cryptocurrency speculators. Saloni Sardana looks at h…
14 May 2021
Inheritance tax planning: the rules around gifting
Inheritance tax

Inheritance tax planning: the rules around gifting

There are plenty of legal ways to minimise an inheritance tax bill. Perhaps the simplest is to give away assets to reduce the size of your estate. Dav…
11 May 2021
Are we nearing the end of the negative bond yield era?
Government bonds

Are we nearing the end of the negative bond yield era?

As inflation gets going, the era of the negative bond yield – that investors have to pay governments for the privilege of lending them money – might b…
14 May 2021