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

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
The end of the bond bull market, and how to invest for it
Investment strategy

The end of the bond bull market, and how to invest for it

The great bond bull market looks to be over, and you probably don’t want to be holding government bonds, says Merryn Somerset Webb. Here’s what you sh…
21 Sep 2021
Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Warsaw and Stockholm: the unexpected new threats to the City of London
UK stockmarkets

Warsaw and Stockholm: the unexpected new threats to the City of London

London has seen off challenges from Frankfurt and Paris, but two other booming financial centres are a bigger threat, says Matthew Lynn.
19 Sep 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How to stop recurring subscriptions becoming a drain on your money
Personal finance

How to stop recurring subscriptions becoming a drain on your money

Tracking and pruning subscriptions isn’t as easy as it sounds. Here's how to take charge.
14 Sep 2021