June 25, 2013, 12:24 / Business

Carrefour intends to sell business in China and Taiwan

Carrefour, the world's second-largest retailer by revenue, is considering selling its business in China and Taiwan through a public offering on the Hong Kong stock exchange or a merger with the assets of other companies, The Wall Street Journal (WSJ) writes, citing informed sources. Carrefour did not comment to the publication. One of the sources told the publication that the retailer’s plans are still at the initial stage, and the hypothetical volume of funds raised as a result of the IPO is about $1 billion. Carrefour needs these funds to further expand and increase competitiveness, writes WSJ.

The company accounts for 77% of its entire Asian division's sales ($8.4 billion) in China, and the French retailer is now facing stiff competition from other players in the local market. At the end of last year, Carrefour had 220 stores in China, making it the fourth largest player with a market share of 6.9%. While six years ago Carrefour was the third largest player in the country with a market share of 9.1%. At the same time, in Taiwan, Carrefour has 48.1% of the market.

Carrefour is leaving those markets where it cannot occupy a leading position, focusing on France, which accounts for 45% of the retailer's total revenue, writes WSJ. For example, Carrefour has exited the markets of Japan, South Korea, Indonesia and Malaysia over the past few years. In 2009, Carrefour also explained its hasty exit from the Russian market.

Companies face challenges in China due to changing consumer habits, rising costs, increased competition from online retailers, strict price regulations, food safety issues and consumer protection, says Wu Wuyi, vice president of restructuring firm AlixPartners business. Over the past 10 years, sales growth rates have been the slowest in the country, he was quoted as saying by the WSJ.

Still, analysts surveyed by the WSJ see China as a promising market for the future—hypermarket sales have doubled over the past five years, from $48 billion in 2008 to $91 billion in 2012, according to Euromonitor.