CEO Guillaume Darrasse is navigating significant financial challenges at Auchan, with a net loss of nearly one billion euros in the first half of 2024, largely due to Auchan France’s underperformance. To combat declining revenues and competition from Leclerc, Auchan plans to reduce hypermarket space by a quarter and has formed a partnership with Intermarché and Casino to enhance purchasing power. However, unions express concerns over job stability amid ongoing restructuring and previous layoffs.
Financial Challenges and Strategic Restructuring at Auchan
Since taking the helm in April, CEO Guillaume Darrasse has faced significant financial hurdles for Auchan. The latest report indicates that for the first half of 2024, parent company Elo has suffered a staggering net loss nearing one billion euros, primarily due to the disappointing performance of Auchan France. With revenues declining by 4.7% and a drop in EBITDA by 115 million euros, the brand finds itself in a precarious position.
This downturn comes amidst aggressive competition, particularly from Leclerc, which has maintained its market lead through strategic pricing and effective inflation management. In response, the Mulliez group is poised to implement a comprehensive strategy overhaul to salvage its operations.
Transforming Hypermarkets to Meet Modern Consumer Demands
The once-thriving hypermarkets that fueled Auchan’s success in the 1960s and 1970s are now seen as a liability. In a bid to cut costs, Auchan plans to scale back approximately one-third of its hypermarket space across Europe, resulting in an average reduction of 25% in retail areas. This move is part of a broader strategy to realign offerings with evolving consumer preferences, which now favor more compact and convenient shopping environments.
Compounding the challenge, this announcement follows previous layoffs, including a social plan from September 2020 that resulted in 1,475 job losses in France, along with over 500 voluntary departures early in the year.
Collaborative Efforts to Enhance Market Position
To bolster its competitiveness, Auchan has initiated a ten-year partnership with competitors Intermarché and Casino, focusing on consolidating food product purchases. This alliance aims to enhance the negotiating leverage of all three brands against suppliers and stabilize product costs. However, this collaboration has sparked concerns among unions regarding potential negative impacts on employment and working conditions.
Despite these strategic alliances, Auchan continues to grapple with the urgent need for solutions to reverse its financial decline and reclaim market share. Currently, Auchan holds just over 9% of the market, significantly trailing behind E.Leclerc (24.1%), Carrefour (21.4%), and Intermarché (17.4%), as reported by Kantar. This disparity presents formidable challenges for the group, which is experiencing a decline in its customer base and overall performance.
Concerns for Employee Stability Amid Restructuring
Union representatives are apprehensive about the potential impact of these changes on employment and the overall stability of Auchan. On Tuesday, employee representatives from various Auchan locations in the Lille area will convene for a CSE (Social and Economic Committee) meeting to discuss the implications of the proposed social plan that could affect their workforce. “The reduction measures will impact both headquarters and retail locations,” a source close to the situation has confirmed, underscoring employee fears regarding the extent of this restructuring.
In light of these uncertainties, Auchan’s management has refrained from offering additional comments, acknowledging the complexity of the situation faced by all parties involved. For the Mulliez group, the priority now is to halt the cycle of financial losses and regain positive momentum while striving to protect as many jobs as possible.