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After four years in Vietnam, Auchan has decided to sell all its stores due to challenging conditions.

Review of loss-making operations

Auchan has 18 stores generating a revenue of US$50.4m in Vietnam. The exit from Vietnam is part of Auchan’s Renaissance action plan to put greater focus on generating profits. The retailer has also signed an agreement to sell most of its estates in Italy to Conad, the Italian co-operative retail group.

Aggressive local retailers in Vietnam

Retailers in Vietnam are investing heavily to grow their network. Domestic retailers like Saigon Co.op and VinMart for example are developing rapidly. Saigon Co.op targets to grow its stores from 650 to 1,000 stores by the end of this year. VinMart’s goal is to have 4,000 stores by 2020 from about 2,000 currently.

 

 

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France-based Auchan has signed an agreement to sell ‘almost all [its] activities’ in Italy to Conad. The acquisition of Auchan’s operations in the country will lead to the cooperative becoming the market leader.

Sale to require agreement of Italy competition authority

No financial details were released as part of the announcement, with an Auchan spokesperson being quoted as saying, separately, that ‘the business was in great difficulties. We are leaving to Conad a financial situation that will allow it to succeed with its acquisition project’.

Auchan said the sale would include almost all its nearly 1,600 stores in the country across its three main physical channels – hypermarkets, supermarkets and convenience stores – and its online activities. The sale, however, does not include 33 non-franchised supermarkets in Sicily nor 50 Lillapois drugstores and the shopping malls in which the Auchan or Simply stores sold to Conad are located.

Sale key part of Renaissance action plan

As part of its 2018 results announcement, Auchan set out how it was evolving its Vision 2025 strategy as part of its ‘Renaissance’ action plan. The new initiative put a greater focus on turning around its profits, which included stemming losses in countries that were identified as ‘durably loss making’.

Alongside its continuing optimisation efforts in France, Russia and China, where it is closing unprofitable stores, the sale of most of its estate in Italy, following the closure of 23 stores in Italy in 2018, will help Auchan back on to the path to profitability. The sale will also enable Auchan to switch money it had earmarked for investment in Italy, for new stores, especially in the convenience channel, and in the digitisation of its operations, elsewhere. Auchan is facing challenges in several countries and so this step should help it to back operations where it is performing better.

Acquisition just the first step for Conad

For Conad, acquiring the stores from Auchan is likely to be one of the easier parts of the process. While the purchase will provide it with many stores, improve its presence in northern Italy and drive its revenue growth, turning them around and enabling them to compete in the highly aggressive Italian market will be challenging.

Auchan has acknowledged its operations in the country have been loss making for several years and so Conad will have to work out how to reverse this performance. Although Conad and its cooperatives will bring local knowledge and a better understanding of regional shoppers, it is going to have to invest in the stores to enable them to compete.

Following similar steps from local rival Casino in Q1 2019, where it has sold stores in batches to Leclerc and Lidl, Auchan has announced it wants to sell or close 21 stores in its home market. The retailer said the stores it had identified, which are over a range of formats, were ‘structurally loss-making’.

Announcement could lead to store closures

Auchan said if it was unable to find buyers for the stores – which are made up of a hypermarket, 13 supermarkets, four Chronodrive, two Halles Auchan and one AuchanDirect preparation centre – they would be closed. Auchan said the 21 stores did not have a ‘a realistic prospect of return to profitability’ and following its 2018 results in France, where revenue fell by 1.3% and EBITDA declined by 44.1%, the need to stem these losses was paramount.

Profitability a growing focus in short term

As part of its 2018 results announcement, Auchan launched its ‘Renaissance’ action plan. Although the strategy builds on the foundations of its Vision 2025, it would be evolved to focus on where the retailer is losing money and take whatever steps are necessary to stem the losses. While other countries were highlighted in the announcement, France clearly remains the retailer’s largest and most important market, so limiting losses there is going to be key.

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Presentations

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We review the outlook for Auchan in all its operations around the world. We look at how it is embedding its Vision 2025 strategy and looks to improve the efficiency of its operations at national and global levels. We also look at the retailer's evolving strategy for international markets and its five year growth prospects.

This in-depth guide to France explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

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We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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