France’s Auchan sticks to Russia despite demand slowdown

Bloomberg

Auchan Retail plans to keep its Russian operations going even though the division is likely to be unprofitable and the country’s invasion of Ukraine continues amid global condemnation.
The French grocer is experiencing a “marked slowdown in activity” in Russia that began in the second quarter, Auchan Retail Chief Financial Officer Ludovic Delcloy told analysts and journalists during a call on Tuesday.
Although Auchan initially benefited as Russian shoppers hoarded grocery items at the onset of the war in Ukraine, activity has since slowed as a “high level of uncertainty” affects consumer demand, he added. The grocer’s hypermarkets often anchor shopping malls but customer footfall has fallen to these locations after other major international retailers, including Inditex SA and Ikea, suspended operations.
Auchan drew the ire of Ukrainian authorities back in March for refusing to pull out of Russia and the country’s Foreign Affairs Minister Dmytro Kuleba called for a boycott of the supermarket chain which also operates in Ukraine
“We had no particular reason to modify our local presence,” in Russia, Jean-Baptiste Emin, deputy CEO for Elo, which owns Auchan Retail said during the call. He said Auchan’s “primary mission” is to “bring healthy food at the right price to local populations.” The grocery chain employs 29,000 people in Russia across 230 stores.
The grocer halted investments into Russia when the war started in last February and the unit functions with “total autonomy” from the rest of the company, Delcloy said.
Auchan declined to disclose interim sales figures for Russia. In 2021, the unit generated $3.21 billion in revenue, representing 10% of total revenue at Auchan Retail.
Revenue in Ukraine was “down sharply”, with 39 out of 42 stores remaining open, the company said in a statement.
Overall, Auchan Retail revenue rose 6.2% to 15.38 billion euros in the first half. In France, its home country, Auchan’s revenue fell 2% like-for-like and earnings plunged 74% as it battled to keep prices competitive amid soaring inflation.