French retailer Auchan is to sell a portfolio of stores in Italy to local cooperative and supermarket chain Conad, according to media reports.
Italian daily Milano Finanza reported that the deal should be closed in the coming days and the operation is valued at around €600-700 million.
The deal involves the sale of 46 Auchan Retail Italia superstores (hypermarkets). Italian businessman Raffale Mincione is to take over the real estate assets, while Conad will manage the commercial activities, according to the report.
Strong Position
The operation will change the dynamics of the Italian grocery retail market, with the acquisition helping Conad to strengthen its position, especially in Northern Italy.
Conad, which ended 2018 with a turnover of €13.4 billion (-3%), has a national market share of 12.9%, but is the leader in the supermarket segment with a 22.4% share. The deal will help it surpass market leader Coop Italia, which holds a 14.2% share.
For its part, Auchan Retail Italia ended 2018 with a turnover of €2.24 billion (-2% year-on-year), of which 52% of sales were achieved in Northern Italy.
Challenging Times
However, the turnaround for Conad will not be easy. Auchan Retail Italia (which also controls the Sma banner) has posted losses for the past two years – €83.5 million in 2018 and €206.1 million a year earlier – and has found the going tough in recent years.
It has faced competition from both the medium-high market segment (Coop, Esselunga, Conad) and from discounters such as Germany’s Aldi and Lidl and Italy’s Eurospin and MD.
Another factor contributing to its the negative performance has been the decline of the hypermarket formula, which was successful in the late 1990s and early 2000s, before waning,
However, it remains to be seen whether Conad will also take over other stores in the Auchan Retail Italia portfolio, which in total boasts 260 outlets, including those of smaller formats Sma and Simply.
The news comes only days after Auchan announced plans to sell 21 stores in France due to low profitability.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Branislav Pekic. Click subscribe to sign up to ESM: The European Supermarket Magazine
