PARIS (FNS) -- The "hard-discount" store format is playing an increasingly important role for Carrefour, the leading French retailer.
Carrefour reported strong sales growth for its hard-discount operations in 1993 while its hypermarkets, the company's core business, felt the pressure of a weak French economy.
Executives of Carrefour told shareholders at the company's annual meeting here last month that sales at its hard-discount stores rose 31.9% in 1993 to about $897 million (5.2 billion francs). Hard-discount stores typically offer very low prices in a simple setting.
Group sales in France, however, declined less than 1% to $13.2 billion in the period. Although Carrefour did not report results for its 114 hypermarkets separately, the huge stores account for the bulk of the company's French sales.
Erteco, Carrefour's hard-discount division, continued to expand and improve its performance in 1993. Erteco operated 432 stores under the Ed L'Epicier, Le Maraicher and Europa Discount banners at the end of the year, more than double the number (209) in operation at the end of 1990.
Carrefour will continue to expand the hard-discount division either by adding new stores or by acquiring stakes in French or foreign firms operating hard-discount stores, executives said at the meeting.
Going forward, Carrefour expects to focus on its core food-distribution business. As part of this effort, Carrefour last year sold its holding in Castorama, a French hardware chain, and But, a furniture and appliance chain, Daniel Bernard, president, told shareholders.
Bernard also said Carrefour's recent decision to increase its stake in Picard Surgeles from 10% to 79% was related to this strategy of focusing on food distribution. Picard Surgeles is a chain of stores specializing in frozen foods.
At the annual meeting, Carrefour executives said they were pleased with 1993 results and are optimistic about the prospects for future growth.
"1993 was a good year, with profits coming from practically all countries," Bernard told shareholders. Growth should continue in 1994, with profits surpassing $344 million, he said.
In 1993, Carrefour reported net earnings of $293 million, an increase of 24.3% from the previous year. Worldwide sales rose 5% to almost $22 billion.
The group achieved these results in a difficult international economy as a result of its ability to adapt to markets and local competition, Bernard said.
In Spain, where national retail sales declined last year, Carrefour's Pryca division reported a 9.4% sales increase to $3.7 billion. Carrefour opened three Pryca stores last year, after having opened six in 1992.
Southeast Asia and China are also on Carrefour's expansion agenda. The company plans to open a store in Kuala Lumpur, Malaysia, at the end of this year and is considering future expansion with a local partner.
Carrefour will use its base of seven stores in Taiwan as a springboard to China and other Asian countries. Sales in Taiwan rose 53.1% to $310.3 million. A new hypermarket is expected to open in Thailand in 1995, the result of a joint venture with a local group.
Carrefour opened its first Italian hypermarket in Marconi, near Venice, last year. Subsequently, the group acquired 80% of the Al Gran Sole chain. The goal of this acquisition was to enable Carrefour to become more familiar with the Italian market, and the buying habits of consumers. The initial results of the Marconi store were "disappointing," the company said.
Carrefour also learned some lessons in trying to expand its strategy internationally. After opening a hypermarket in Philadelphia in 1987 and a second U.S. store two years ago in New Jersey, Carrefour closed both units and withdrew from the U.S. market in late 1993.
"We only opened two stores in the United States and without any partners," Michel Pinot, a Carrefour board member who runs the group's activities in the Americas, said at the annual meeting. Pinot said Carrefour's buying power was too weak in the United States to attain "sufficient" sales and earnings.
"We learned from this," Pinot said of the company's U.S. experiment. "It's one of the reasons why we did not go into Mexico alone."
Pinot was referring to a recently signed joint-venture agreement with Grupo Gigante, a large distribution group in Mexico. The partners opened their first Hyper G store last year in Mexico City and plan to open two more units this year, in Mexico City and Guadalajara.
Carrefour ventured into Turkey last year without a local partner, opening a hypermarket in an industrial zone just outside Istanbul. The store is doing "better than expected," but it had to overcome some local challenges, said Rene Brillet, a Carrefour executive.
In particular, it was tough to get the sales staff accustomed to the fact that they "would not be served tea at their posts," he said.