Carrefour freezes big city store plans

Carrefour, the world's largest retailer after Walmart, is learnt to be rationalising its expansion plans in India, prompted by a worsening global economy, particularly in Europe.

Pune was a major destination the France-based chain was looking at for its cash and carry (wholesale) operations, but that's now on the backburner, according to two sources. Some of the other store openings it had planned in the country for 2012 might also get delayed, they said.

The retailer was busy finalising 10 to 12 real estate lease deals across India around the end of 2011 for its new stores. After launching its second store in Jaipur at end-2011, Carrefour was targeting Pune, Meerut and Agra next.

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It had also begun the hiring process for its planned outlets, including for Pune. Six months later, much of the hiring has been put on hold, though many of the land deals have been done.

While maintaining that Pune or any other big city was not on the horizon at this point, sector insiders say Carrefour could well open a store in a smaller town, either Meerut or Agra, by the end of this year.

Some in the industry say the chain could even launch in both towns towards the year-end. Rival US-based chain Walmart, in a JV with Bharti Enterprises, already operates cash and carry stores in Meerut and Agra, among a total of 17 outlets it has in India. Opening a cash and carry store could mean an investment of anything from Rs 60 crore to Rs 75  crore (Rs 600 to Rs 750 million), on average, depending on the size and location.

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Carrefour did not respond to a questionnaire sent by Business Standard on its expansion plan. But the group, with yearly revenue topping Euro 100 billion, said in its annual report recently that in 2012 it intended to maintain strict financial discipline in response to a still challenging business environment. While it wanted to continue to focus on emerging markets, the preferred areas included China, Brazil and Indonesia, it said.

The group, known for its supermarket and convenience store format in other parts of the world, has had a slow beginning in India.

It opened the first cash and carry store in Delhi in December 2010 and the second in Jaipur a year later. The year 2012 was widely seen to be an aggressive launch year but that perception has now changed.

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Carrefour, like some other international retail majors such as Walmart and Tesco, is waiting for India to allow foreign direct investment (FDI) in multi-brand retail. Carrefour India chief Jean Noel Bironneau had in May met Commerce Minister Anand Sharma to discuss retail business issues, including FDI.

The chain currently operates cash and carry stores in India, for which there's no cap on FDI.

Cash and carry outlets, which sell anything from grocery to white goods to businesses, organisations, offices and educational institutions, are usually spread across 60,000-75,000 sq ft.

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While Carrefour started its India foray with Delhi, Germany's Metro has gone into big cities such as Delhi, Kolkata, Mumbai, Bangalore and Hyderabad.

Carrefour has been reducing its stores in France and the rest of Europe due to the slowing economy over the recent months, but not in emerging markets such as Brazil or China.

Globally, the group reported an operating loss of Euro 481 million in 2011,compared with an income of Euro 1,703 million in the previous year.

In Asia, it added 25 hypermarkets in 2011, with China (23 openings) accounting for most of the increase. In the first quarter of 2012, the group's sales improved marginally by 1.5 per cent to touch Euro 22.5 billion.