Carrefour has spread itself too thin and now, faced with ongoing pressure from shareholders to improve profitability, is on a path to divest non-core markets.

Carrefour’s retail net casts over 42 countries, more than twice the number of global leader Walmart. Despite this, Walmart’s international division generates about $100bn (£66.4bn) in sales in comparison with the $68bn (£45.1bn) generated by Carrefour.

Clearly, Carrefour has spread itself too thin and now, faced with ongoing pressure from shareholders to improve profitability, is on a path to divest non-core markets.

Last week, there were murmurs of an exit from southeast Asia. The move to exit Malaysia, Singapore and Thailand, which collectively account for less than 2% of group sales, should certainly be seen as a positive move as it would enable Carrefour to free up nearly $1bn (£663.8m) which could be reinvested in its core European division as well as more lucrative markets such as China and Brazil, the latter of which is expected to become its most important international market in terms of sales from next year.

Carrefour dismissed the rumour it was exiting Malaysia and Singapore. Interestingly, it denied to comment on speculation of an exit from Thailand, which adds to previous doubts over the company’s long-term ability to trade in a country where, despite it being present for more than a decade, holds a mere 2% share as the fifth largest retailer.

The $47bn (£31.2bn) Thai grocery sector is dominated by foreign grocers, which rushed in after the 1997 Asian economic crisis. However, the relatively small size of the market combined with the fact that it is still dominated by ‘mom and pop stores’ means there are limited growth opportunities for modern grocery retailers. Delhaize and Ahold both exited Thailand in 2004, and now Carrefour is likely to follow suit. Should a sale occur, Tesco and Casino would likely be interested in Carrefour’s Thai assets. Tesco is the market leader in Thailand with sales of about $3.7bn (£2.46bn), almost five times the size of Carrefour’s operation. Number three Casino would also benefit from the Carrefour stores, although both would likely struggle to get regulatory approval for such an acquisition given their current dominance.

Looking beyond Asia, we have recently seen a degree of store rationalisation in Europe, in particular in southern Italy and Belgium. Further store closures are almost certainly on the cards with Portugal also mooted as a potential market exit, as Carrefour looks to focus solely on geographies where it has the ability to attain a market leading position.

Natalie Berg is research director, Planet Retail.

Planet Retail

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