Carrefour would limit its potential for future revenue growth if the French retail giant were to bow to reported investor pressure and sell operations in emerging markets, an analyst has insisted.
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According to a report in French newspaper Le Monde, Carrefour’s largest investors – Colony Capital and Bernard Arnault – are placing the management of the French retailer under pressure to sell-off its operations in emerging markets like China.
“They are under a lot of pressure from investors,” Verdict Research’s Simon Chin told just-food. “If they did exit, in my opinion, it would be a bad call.”
Chin said that any divestment would not severely dent revenues in the short term. However, he insisted that such a move would be “short sighted” because of the potential markets in Asia and Latin America offer the European retailer.
“This is short-term thinking from investors. If you look at the longer-term prospects it would be more profitable for Carrefour to continue developing its businesses in emerging markets. The hypermarket format, in which Carrefour is particularly strong, suits emerging markets such as Brazil and China but, looking to the future, Carrefour could also launch its multi-format strategy in these markets,” he suggested.
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By GlobalDataWhile Carrefour investors have a recent track record of strong involvement in determining the company’s direction – including ousting the group’s former CEO – Chin said that management had indicated that its current strategy is to continue to invest and develop in emerging markets.
“Looking at the latest presentations, management have said that they want to develop emerging markets. They want to build a strong presence in key so-called BRIC markets,” he revealed.
The company recently opened its first hypermarket in Russia and is in talks to form a joint venture in India.
In fiscal 2008, Latin America accounted for 12% of operating profit and Asia accounted for 8.5%. Sales in these regions increased to 26% and 11% respectively.
Sales in the company’s domestic market increased a sluggish 1%. However, France still accounts for 44% of total revenue.
Carrefour could not be reached for immediate comment.
