Carrefour Brasil SA expects to keep capital expenditure to convert 30 stores acquired from smaller rival Makro into its Atacadão wholesale format below R$300 million (€63.06 million), an executive said on Friday.
The recently announced acquisition accelerates Carrefour Brazil's most profitable unit as competition intensifies in Latin America's largest market, where the wholesale segment has boomed as the country recovers tepidly from a deep recession.
"Makro has made some renovations in some of the stores to make them more efficient, so capex is likely to be smaller than when we open a new Atacadão store," Roberto Müssnich, who leads Carrefour Brazil's wholesale unit, said on a call to discuss quarterly earnings.
According to the executive, the local subsidiary of France's Carrefour SA aims to spend less than R$10 million on each of the conversions, which should begin only after local antitrust regulator Cade approves the transaction. It should take three to six months to reopen each store as Atacadão, he said.
Since 2009, Carrefour Brasil has also converted 15 of its hypermarkets to the Atacadão format. Müssnich said the company may consider future conversions depending on the performance of the 104 hypermarkets left in its portfolio.
A similar strategy has been adopted by its main competitor, GPA, to expand its own wholesale business, called Assaí in Brazil.
On Thursday (20 February), the Brazilian subsidiary of French retailer Casino Guichard Perrachon SA announced plans to convert around 20 Extra hypermarkets into Assaí wholesale stores, besides selling or closing another 10.
Open To Considering Acquisition Of GPA's Hypermarkets
Chief financial officer, Sébastien Durchon, noted that Carrefour Brasil is open to considering an acquisition of GPA's hypermarkets, though they are not up for sale.
"We see competitors no longer betting on this format, but for us hypermarkets continue to be key in our ecosystem, as they help us boost banking services," said Luis Moreno, chief executive of Carrefour Retail unit.
The retailer sells electronic and home appliances on credit in its hypermarkets, besides hosting gas stations and renting out space to other retailers.
"In general, Carrefour Brasil once again outperformed GPA," even with margin under pressure from higher investments, an analyst at BTG Pactual wrote in a note to clients.
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