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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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".

Advertisement

Recommended

Visit/517688/the-british-equity-market-is-shrinking
Stock markets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stock markets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019
Visit/510135/trade-war-ceasefire-boosts-stockmarkets
Economy

Trade-war ceasefire boosts stockmarkets

Stockmarkets sighed with relief after the G20 summit in Japan brought a handshake between Donald Trump and Xi Jinping.
4 Jul 2019

Most Popular

Visit/investments/commodities/gold/600686/gold-and-silver-bull-market-2020
Gold

Want to make money in 2020? Gold and silver are looking like a good bet

If you want to make money from investing, says Dominic Frisby, it’s simple: find a bull market and go long. And in 2020 gold and silver are in a bull …
22 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600672/share-tips-of-the-week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
24 Jan 2020
Visit/economy/global-economy/600711/the-charts-that-matter-coronavirus-or-a-liquidity-air-pocket
Global Economy

The charts that matter: coronavirus – or a liquidity air pocket?

With the yield curve showing worrying signs of flatlining again. John Stepek wonders what's to blame and turns to the charts that matter most to the g…
25 Jan 2020
Visit/investments/investment-strategy/600709/the-coronavirus-is-scary-but-its-irrelevant-to-your
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020