March 10, 2014 / 7:00 PM / 5 years ago

Retailer Auchan bets on price cuts to lift French business

LILLE, France (Reuters) - French retailer Auchan said it plans to take on larger rivals such as Carrefour (CARR.PA) and Casino (CASP.PA) with price cuts and aggressive promotions this year after seeing its domestic market share and sales decline in 2013.

The logo of Auchan is seen on the roof of an Auchan supermarket in Englos, northern France, March 10, 2014. REUTERS/Pascal Rossignol

The hypermarket and supermarket operator’s revenue fell 1.1 percent last year in France, which contributes more than two fifths of the total, and 2.8 percent in Western Europe excluding France, it said on Monday.

“Due to a very downbeat economic environment in the euro zone, revenue growth was driven solely by Central and Eastern Europe, and Asia, which recorded growth of 11.1 percent,” Auchan said in a statement.

Auchan is the second-biggest retailer in China via its joint venture with Sun Art Retail (6808.HK) and has expanded in Poland, Russia, Ukraine and Romania through the purchase of German retailer Metro’s MEOG.DE Real hypermarkets.

These markets enabled Auchan to achieve a 4.1 percent rise in overall revenue to 62.1 billion euros ($86.2 billion) last year, it said.

Net profit rose 19 percent to 767 million euros, buoyed by the disposal by Auchan’s Immochan division of 17 shopping centres and 11 retail parks in France, Luxembourg and Italy for 268 million euros.

According to data from Kantar WorldPanel, Auchan is France’s fifth-biggest retailer with a market share that slipped 0.2 percentage points to 11.3 percent last year. This lagged Carrefour with 20.3 percent, Leclerc with 19.6 percent, Intermarche with 14.2 percent and Casino with 11.7 percent.

Auchan France head Vincent Mignot told a news conference that the retailer had been particularly hit by the impact of tightening household budgets on purchases of non-food items at its hypermarkets.

“We are going to experience a year of deflation,” Mignot said, saying price cuts would be financed through lower purchasing costs.

Rival Carrefour, the world’s second-largest retailer, has been seeking to cut costs, revamp stores, improve price competitiveness, simplify product offerings and give more autonomy to store managers to revive its domestic business. It achieved a 5.3 percent rise in operating profit last year, partly thanks to a sharp improvement in France.

In the UK, Tesco (TSCO.L) last month said it would pin its domestic turnaround on price cuts and revamping stores.

Auchan, which operates 78 hypermarkets and 122 supermarkets in Russia and just opened its 11th hypermarket in Ukraine in Simferopol, in Crimea, added that it had not seen any impact so far from the current stand-off between the two countries.

“Business is relatively stable for now” in Ukraine, finance head Xavier de Mezerac told Reuters.

Writing by James Regan, editing by Louise Heavens

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