Belgian supermarket chain Colruyt has announced it wants to open five to seven French stores per year, in order to reach a scale that would make its French activities profitable.
Losing money in France
Colruyt confirms its French ambitions, after a Morgan Stanley analysis questioned the chain's expansion strategy. Analyst Maria-Laura Adurno called France a big risk for the Belgian discounter: margins are under pressure in France as a long price war continues.
"At the moment they are not realising an operational profit in France, and we believe it will be difficult to begin generating margins in that market due to the difficult market circumstances and a lack of scale", Adurno told Belgian business newspaper De Tijd.
The supermarket group offered a swift reply, saying it aims to reach the milestone of a hundred French stores within the next few years. Currently Colruyt has 85 stores in the country, but it has accelerated its expansion from three or four to five or seven stores per year.
The French market may lead a way out of the saturation and heavy competition that is still increasing on the Belgian market, even though French turnover currently is only 490 million euros - barely 8.2 % of total turnover. The stores are still accumulating losses, but "we see that currently as an investment", COO Marc Hofman says. That investment also applies to infrastructure: Colruyt is building a new distribution centre in France, doubling its capacity, and a larger office block.