French retailer Carrefour has surprised the retail world by announcing its decision to exit the Russian market, having only recently opened its first two hypermarkets in Moscow and Krasnodar.
According to the retailer, the decision was taken after Carrefour posted a 2.9% drop in third-quarter sales. Carrefour said in a statement that it has decided to sell the business due to a lack of both prospects for organic growth and opportunities for acquisitions. In the past 12 months, Carrefour was negotiating with some leading Russian retailers, such as Lenta and Sedmoi Kontinent, about a possible acquisition, but no deal was closed.
It can take years for retailers to produce satisfactory results in new international markets – particularly high potential growth markets such as Russia – so it is surprising that the company has exited just four months after opening its first store. Poor sales and a lack of acquisition targets seem a convenient and perhaps an unlikely excuse.
Carrefour has been linked with the Russian market since June 2006 and has invested a considerable amount of time and money in opening its first stores in the country. The retailer would have been more than aware of the difficulties of acquiring businesses in Russia well before now, and couldn’t have been expecting fantastic results from just two stores that have opened in the middle of a recession.
We could speculate that the Russian market is simply not the bed of roses many international retailers believed it to be. The latter seems almost certainly true, with only Auchan of the international retailers that have tried their hand in Russia having had any success. Perhaps the retailer simply underestimated the cost of a potential acquisition, or the change in ownership of many of the domestic retailers to the country’s banks has complicated matters; either way, if the retailer harboured any ambitions in the market, it surely could have made something happen.
There have also been rumours Carrefour is about to exit China. The company has denied such allegations, with Chen Bo, spokesman for Carrefour China, saying: “[CEO] Lars Olofsson said on his trip in China last month Carrefour is optimistic about the Chinese economy and thinks highly of the potential for the market.” Hardly a bullish denial, but it seems inconceivable that the world’s second-largest retailer could exit two of the globe’s fastest-growing markets in one year.
➤Greg Hodge, research
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