With Carrefour’s planned exit from Singapore, residents in the
city-state may be bemoaning a possible dearth of affordable brie. But analysts
are already totting up who will stand to benefit.
The French retailer said Tuesday
it will close its two Singapore stores by the end of the year, after it failed
to sell its Singapore and Malaysia operations in 2010. The company said it was
closing the stores now because “expansion and growth perspectives do not allow
reaching a leadership position in the medium and long term.”
Among the possible beneficiaries,
according to CIMB: Dairy Farm, which operates Giant hypermarkets.
“Not only will Dairy Farm get a
chance to extend its local market leadership, but it can also swoop in on
Carrefour’s retail staff, a boon in the current tight labor market,” CIMB said
in a report.
Dairy Farm’s eight Giant outlets
give it more than 50% of Singapore’s hypermarket market share, with nearest
competitor NTUC FairPrice having five. Many shoppers in the city-state – conscious
of rising prices of food, transport and housing – have been turning to cheaper
alternatives to Carrefour, like Giant, NTUC FairPrice and local hypermarket
chain Sheng Siong, chipping away at Carrefour’s market share.
Carrefour, which is the world’s
second-largest retailer after Wal-Mart Stores Inc WMT +0.48%., has also had to
face higher rentals at its two Singapore branches – located in malls in the
city’s heart – compared with local hypermarket Sheng Siong, which instead
targets neighborhoods outside the central area.
CIMB expects Dairy Farm to
explore taking over Carrefour’s outlet at Plaza Singapura, noting even before
Carrefour’s decision, Dairy Farm was planning a location at the city-state’s
prominent Suntec complex. Analysts from the bank estimate sales at Carrefour’s
two outlets were about €100 million (US$125 million), or around 10% of Dairy
Farm Singapore’s revenue. It rates the stock at outperform with a US$12.00
target. The stock ended Thursday down 0.1%, or one Singapore cent, at S$10.88 (US$8.68).
Efforts to reach Dairy Farm were
unsuccessful. A Sheng Siong spokesperson said via email it doesn’t expect
Carrefour’s exit to have much impact on its business and it is still looking
for suitable retail spaces for expansion. Seah Kian Peng, chief executive
officer (Singapore) of NTUC FairPrice, said the retailer “continuously looks
for opportunities to expand our footprint to be more accessible to our
customers” and that it “is always open to augment our current workforce.”
Surprisingly, perhaps,
Carrefour’s landlords may also reap benefits, said David Lum, an analyst at
Daiwa, in a note to clients. He said the departure is a net positive for
landlords Suntec REIT and CapitaMall Trust since it could open the door for new
and potentially higher-paying tenants to move in – something that usually
happens quickly in Singapore, where unoccupied mall space typically is filled
quickly. “The benefits from a better and higher-yielding tenant mix would
outweigh any short-term revenue loss,” he wrote.
On Thursday, Carrefour announced
a net loss of €31 million in the first half of the year, following decisions to
pull out of Singapore and Greece. In June this year, Carrefour sold its stake
in its Greek supermarket to its local partner, exiting the country at a loss.
Still, its net loss was narrower than last year, when the company lost €249
million.
Back in 2010, the French retailer
had planned to sell its operations in the region – Singapore, Thailand and
Malaysia – but only attracted satisfactory bids for its Thai stores. The latest
announcements also follow earlier news reports this week that Carrefour will
cut hundreds of jobs at its French headquarters, which currently employs about
7,500.
Leslie Shaffer
Business & Investment Opportunities
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