Central shifts focus from tough China

Central shifts focus from tough China

Retail giant looking at Europe and Asean

Central Group, the country's biggest retail conglomerate, will cut back its investment plan in China and shift its focus to Europe and Asean.

The move owes to China's massive size, which creates difficulty in meeting the demands of consumers in the various regions.

In addition, Central entered the Chinese market late, according to a source, with local department stores forcing Chinese suppliers to ignore the latecomer.

There are three Central department stores in China: one each in Hangzhou, Chengdu and Shenyang.

A Zen department store in Shenyang recently closed.

"The business of Central department store did not reach economies of scale because of its small number when compared with local operators and international rivals like Malaysia's Parkson," the source said.

Suthichart Chirathivat, vice-chairman of the Central Group board, said Central will consider opportunities in Europe and Asean, especially Vietnam, Indonesia and Malaysia.

Chief executive Tos Chirathivat said forecasts call for Indonesia's economy to eclipse Germany's in size within two decades, while Vietnam's will equal Thailand's in 10 years.

Central runs 12 department stores in Europe, of which 11 are under the La Rinascente brand in Italy and one is Denmark's Illum, which will complete the first phase of its facelift in November.

The group will open a new La Rinascente department store in Rome in the next two years as planned.

The business of La Rinascente in Italy is healthy, with 8% sales growth in 2013.

In Asia, Central operates the three department stores in China and one Robins store in Vietnam. More developments will open soon in Indonesia and Malaysia.

Prin Chirathivat, the group's chief financial officer, said Central has become more cautious about new investment in the current political and economic environment.

In the past five years, the group spent an average of 20 billion baht on expansion annually.

This year's investment budget is set at 44 billion baht, but next year may see a pullback to 30 billion baht.

Mr Prin said the group is negotiating with companies on 10 merger and acquisition deals. Two or three could possibly conclude by the end of the year.

"We are now looking to open new stores in the European market," said Sean Christopher Hill, the retail expansion manager of La Rinascente. "About four countries are under analysis for business opportunities."

All potential stores are in tourist destinations with attractions and economies of scale.

"It's a good time to invest in Europe," Mr Hill said. "The only concern is the problem between Ukraine and Russia, which are among the top spending countries for luxury products in Europe."

At home, Central will open new retail branches in four or five border towns, hoping to benefit from the onset of the Asean Economic Community in late 2015.

Last week, the group officially opened Central Embassy, a new retail landmark at the junction of Bangkok's Wireless and Phloenchit roads.

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