Central Group may phase out its retail business in China to focus on higher potential markets such as Europe and Asean.
The group will this year close mergers and acquisitions deals with local retail operators in three major cities in Europe.
Central Retail Corporation (CRC), the group’s retail arm, acquired La Rinascente, a leading luxury department store operator with 13 properties across Italy, in May 2011, followed by Illum, a famous department store in Denmark, in March of last year.
Suthichart Chirathivat, executive vice chairman of Central Group, said last week that the company’s retail business in China is facing tough competition from local operators.
Central Department Store has three major branches in China in Hangzhou, Shenyang and Chengdu. Zen Department Store in Shenyang was closed last year.
"It is the time for Central Group to grow its retail business outside Thailand, such as in Vietnam, Indonesia and Europe. We have already enjoyed matured growth within the country," he said.
"In Thailand, we’re not able to control such external factors as politics, but as a business operator, we will do our best. Everything will get better if the political problem is over," he said.
Asean is moving towards the Asean Economic Community, an integrated market.
Prin Chirathivat, chief financial officer of Central Group, said that at least Bt30 billion would be invested in retail expansion next year.
"In Thailand, we are looking to invest long term. We will not even change our plan for such good investment projects. Some delay will be made if the Kingdom’s economic and political situations are uncertain," he said.
More than Bt20 billion has been invested annually in retail expansion over the past five years. The budget had been raised to about Bt40 billion this year.
"We’re negotiating for about 10 potential mergers and acquisitions deals set to expand our retail business abroad. However, about two to three deals will be finalised this year," he said.
Sean Hill, retail expansion manager of La Rinascente, said the company was analysing new retail opportunities in Europe. The firm was constructing a store in Rome, which would open by the end of next year.
"We’re looking to expand our retail business in four big cities in Europe, which have strong potential in attracting large numbers of tourists and with important economic indications. We’re following the plan set by management," he said.
CRC operates 11 department stores in Italy and one in Denmark.
"We’re still growing well even though the retail industry in Italy is slowing down and is competitive. Russian tourists, who are the biggest luxury spenders, have been declining due to uncertainty over the unrest in Ukraine. Russian tourists spend about 1,000 euros per day, which is higher than the 150 euros spent by other tourists," he said.
Tos Chirathivat, CEO of Central Group, said growth of its retail sales was not good in the first four months of this year, due to the political and economic difficulties.
"We need to focus on better control of our costs. Thailand can do nothing at this moment even in any AEC implementation activities, as we have no government to take care of them. We need to have the government first to allow the Kingdom’s domestic and international projects and activities to be carried on as normal," he said.