French retailer Auchan hopes its Chinese operations will drive growth because sales in Western Europe are expected to remain flat.

Auchan enjoyed stronger sales growth in central and Eastern Europe and Asia

The retailer has reported that consolidated revenue excluding taxes rose 4.4% to e44.4bn (£36.83bn) in fiscal 2011.

Although the group’s French hypermarket division accounts for the lion’s share of Auchan’s turnover, the retailer is increasingly looking overseas and diversifying its formats.

Auchan reported stronger sales growth in central and Eastern Europe and Asian operations while Western Europe struggled.

Turnover at Auchan’s Sun Art operation in China – with Ruentex Group – rose 21.2% to CNY68.1 billion (£6.79bn) and like-for-likes grew 8.8% for the financial year 2011. The company already operates 230 hypermarkets in China under the Auchan and RT Mart brands and has ambitious expansion plans for the future.

Construction on 80 out of a total of 153 stores has already begun. Moreover, Sun Art aims to add at least 50 stores in the mainland this year.

The retailer is leading the Chinese retail scene at present and aims to strengthen its position. Rival Walmart last year saw the departure of its chief financial officer and chief operating officer following a food scandal. In spite of the executive moves, China remains a key growth market and Walmart will continue to expand its large-format stores, particularly in second- and third-tier cities. Nonetheless, Tesco and Carrefour are other big competitors for Auchan.

Tesco has proved it can successfully operate in Asia, establishing large businesses in Thailand and South Korea.

Tesco now hopes to quadruple its sales in China and generate more than £4bn a year by fiscal 2014.

It is focusing on expanding the hypermarket format as the Express convenience stores are still to gain traction. The retailer has also partnered with China-based electronics retailer Gome to push forward expansion plans.

Carrefour reported negative like-for-like growth in China owing to mild weather conditions affecting sales of non-food items and tough legislation restricting markdowns. Recently, one of its stores was scrutinised by the local government over food safety issues. The dip in growth could also be attributed to Carrefour’s poor management. Meanwhile, Auchan seems to have found its feet and is poised for strong growth in the Chinese market.

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