Carrefour is facing well-documented challenges in its efforts to make its domestic French operation more competitive after a number of sub -par years. Focusing on France, which drives its share price and is the main concern for investors, is likely to come at the expense of emerging markets. Carrefour has already exited some markets where it does not have market leadership or does not see its long-term presence there as viable. While emerging markets are likely to drive long-term growth for large Western retailers, when their domestic markets are faltering this requires urgent attention . In the case of Turkey, this might leave Carrefour in a trick y position. Fundamentally it is one of BMI 's favourite retail growth markets and provides tremendous long-term opportunities. However, it is believed that Carrefour's joint venture with the domestic conglomerate Sabanci , has not realised its potential as of yet. CarrefourSA , a joint venture between Carrefour and Sabanci is 39% owned by the latter and a research note by Erste Group Bank has argued that Sabanci is more likely to acquire Carrefour SA than the other way round.
|Turkey Total Mass Grocery Retail Sales (US$bn) - Historic & Forecast - 2005-2016|
In our opinion, exiting Turkey would not be a good outcome for Carrefour despite its problems at home. Turkey is just too strong an opportunity to get out now. However, such has been the severity of the struggle at home, an exit cannot be discounted.
BMI has held a very positive view on Turkey's retail sector for a long time. At the most basic level, rising incomes will allow a much greater proportion of the population to regularly shop at organised food retail stores. Bearing in mind that informal independent stores still account for the majority of food sales, the trade up to organised food retailing forms the backbone of our long-term view on Turkish retail. With a consumption-driven economy that can boast a population of about 75mn and a relatively stable banking system that owes much to reforms made in the early 2000s, Turkey is an outstanding long-term opportunity.