Carrefour admits reviewing Polish and Turkish investments

By bne IntelliNews August 31, 2012

Tim Gosling in Prague -

Following weeks of speculation, Carrefour, the world's second largest retailer, admitted on August 30 that it is reviewing its investments in several markets, including Poland and Turkey.

Speaking after the release of second-quarter results that showed the group trimmed losses but also lost ground on operating profit due to pressure in key markets, CEO Georges Plassat said Carrefour must defend its positions in mature markets, and put an emphasis on key markets such as China or Latin America. To that end, he said the company will focus on lowering its costs - of debt in particular - and improving operational cash flow.

Other smaller markets however, where competition is strong and the French retailer has struggled to hit its standard target to enter the top three in terms of market share, have the board reflecting on strategy. Carrefour has already pulled out of Russia and the Czech Republic since the crisis hit in 2008. In June, the company shed its unprofitable Greek operations, and the possibility of exiting other markets is under review. Speculation of a potential exit from Romania has also risen in recent weeks.

Plassat, the company's third boss in four years following a long fight with disgruntled shareholders over recent years, faces a difficult task to compete with discount stores as Europe tips toward recession, taking the global markets with it. However, he denied speculation that the retailer could look to raise additional capital. "We're keeping the mature countries, we're going to defend them, other important countries are Brazil and China," Plassat said, according to Reuters. "In certain countries, like Poland, we could adjust our positions. In Indonesia and Turkey, we're considering what to do."

That leaves the French retailer potentially abandoning two of the fastest growing economies in the European neighbourhood as the crisis bites. The company currently operates 350 stores in Poland with a combined PLN9bn in revenue. Although that puts it in the top three in the country, it has been losing ground on Tesco, the country's second largest grocer behind runaway leader Biedronka, a discount outlet owned by Portugual's Jeronimo Martins. Carrefour only confirmed in July reports that it plans to open 200 new franchise convenience stores in Poland by the end of the year.

In Turkey, Carrefour has been facing a tricky situation for some time, as it battles local partner Sabanci Holding. Matters came close to a head in July, when the chairman and three other board members at the CarrefourSa JV walked out. Sabanci Holding has repeated many times that it is unhappy with the performance of the JV, blaming managerial problems.

Tesco, Wal-Mart and Auchan are among potential candidates to take over Carrefour's CEE assets if the company does decide to make an exit according to speculation, while the local partner is the obvious candidate in Turkey, although it is unclear whether Sabanci has the financing to fund a takeover. The French retailer holds a 58.2% stake in the JV, with Sabanci holding 38.8%. However, speculation has also done the rounds that Carrefour has been planning to team up with another Turkish partner - MAF, while Sabanci is seeking a partnership with Auchan.

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