Auchan cuts costs and jobs

Auchan ‘s management is taking out the hatchet: the loss-making French food retailer is to cut nearly 2,400 jobs, close ten unprofitable stores and reorganise its home delivery business.

Necessary restructuring

Auchan announced a major restructuring on Tuesday morning. The retailer is cutting 2,389 of some 54,000 jobs in France. These include 784 jobs at its headquarters and 915 jobs in its stores. The closure of three warehouses dedicated to e-commerce in order to ensure home delivery by the stores themselves will cost 224 jobs, and the closure of some ten stores will cause another 466 people to lose their jobs. However, 114 jobs would be created by the further expansion of pick-up points and 205 jobs will also be added at the head office, bringing the net job loss to 2070.

The restructuring is unprecedented but necessary, according to Guillaume Darrasse, the new top executive for eight months. In the first half of this year, parent company Elo had to admit a 1 billion euros loss, while sales fell 4.7%. Last year, the retailer posted a net loss of 379 million euros. Over the past 12 years, the chain lost four percentage points of market share in France. Auchan already had to undergo a major restructuring in 2020, eliminating a total of 1,500 jobs.

Shrinking stores

The French food retailer operates mainly in the hypermarket segment, a format that is under pressure while discounters and convenience stores are growing. Auchan cannot compete with the price violence of E.Leclerc and Intermarché, two chains that are also much more powerful with their franchise model.

To become more competitive, the retailer plans to reduce the surface areas of its hypermarkets by around 25%: in 70% of the stores, the surface area is to shrink to less than 10,000 sqm. The non-food offer will be reduced by 30-40%. More stores will be transferred to franchise partners: today only 40 of France’s 260 shops are operated by independents, within three years there should be 200.

Alliances

Early this year, Auchan took over 98 stores from the Casino group. The retailer also entered into a purchasing alliance with Intermarché and Casino. Economies of scale are needed as the French number five, with a market share of less than 9%, is well behind the ‘big four’ E.Leclerc, Carrefour, Intermarché and Coopérative U.

The chain, which operates in 12 countries, is owned by the Mulliez family, which also controls Leroy-Merlin, Decathlon and Kiabi.