March 8, 2019 / 11:10 AM / a year ago

France's 'Yellow Vests' protests prove costly for retailer Auchan

PARIS (Reuters) - France’s anti-government “Yellow Vests” protests hit the 2018 profits of retailer Auchan, costing it 140 million euros (120.3 million pounds) in lost sales, adding to pressure on the company which plans to cut costs and scale down investments this year.

FILE PHOTO: The logo of French retailer Auchan is pictured on a shopping centre in La Defense at Courbevoie near Paris, France, May 16, 2018. REUTERS/Charles Platiau/File Photo

Auchan, which faces pricing pressure at home from the likes of Carrefour and Leclerc as well as competition from Amazon, also suffered last year from problems with its turnaround plans, its new boss said on Friday.

“2018 earnings are very unsatisfactory. Our short-term goal is to turn around Auchan Retail. This is the reason why I was appointed in October,” said Edgard Bonte, the 45-year old Auchan Holding management board chairman.

“We are aiming for a significant results improvements from 2019,” he added.

Tough market conditions also hit Auchan’s results in Italy, Russia, and Asia where its Sun Art Retail subsidiary faces online competition.

Earnings before interest, tax, depreciation and amortisation (EBITDA) at the Auchan Retail arm slumped 20.5 percent to 1.518 billion euros in 2018 at current exchange rates, while revenues fell 3.3 percent to 50.3 billion euros.

Revenue in France, where Auchan Retail makes 35.2 percent of its sales, fell 1.3 percent, with the “Yellow Vests” protests also knocking 35 million off EBITDA.

The months-long protests, named after the bright jackets worn by demonstrators, forced many shops to shut on Saturdays in central Paris, as the capital suffered its worst rioting and vandalism in decades.

NO CHINA RETREAT

Besides Auchan Retail, the Auchan Holding company also includes the Ceetrus property business and the Oney banking arm.

Auchan Holding reported a 2018 net loss of 997 million euros ($1.12 billion) following a 1.1 billion euro impairment charge on Auchan Retail’s assets in Italy, France and Russia.

In 2017, Auchan launched a three-year plan to modernise its hypermarkets, accelerate online expansion and focus more on smaller convenience stores. It also closed 23 loss-making stores in Italy and 11 stores in Russia last year.

Bonte, who said the revival effort had been “too complex”, on Friday unveiled a new action plan named “Renaissance”. He said this would entail “reviewing all solutions in countries where we are durably loss-making like Italy and Vietnam”.

Auchan plans to close 30 more stores in Russia and three stores in China this year, he said.

China, where Auchan makes 28 percent of revenue, is the group’s second largest market after France. It remains a key area for expansion, Bonte said.

“We are not giving up on China,” he said, in response to recent speculation about Auchan’s plans over there after Sun Art said its French boss would be replaced by a Chinese successor.

Auchan has also teamed up with Casino, Germany’s Metro , Schiever and Spain’s Dia in a purchasing alliance that became operational last month in a bid to cut costs.

The retailer expects to benefit from a deal sealed by Sun Art and Chinese tech giant Alibaba last year in China.

Auchan’s latest plan will put more focus on organic food, and scale down space for non-food items in its French 123 hypermarkets.

But Auchan will also follow Carrefour in having sections in its hypermarkets for non-food items sold by a partner company. Carrefour has an in-store partnership with electronics retailer Fnac Darty. Auchan will trial this in five French hypermarkets in the second half of 2019.

Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta/Elaine Hardcastle/Jane Merriman

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