Galeries Lafayette in two opposite dynamics in China and France

news May 2023 Mind Retail

What: A press article about the fact that, while Galeries Lafayette are moving forward in China, their French partner is in deep trouble.

Why it is important: Strategic choices have been made by the French leader to focus on external markets, however, the damage control will be hard to make in case Hermione falls down, and might affect the group’s reputation.

While Galeries Lafayette forms a partnership with a new Chinese partner, Hopson Group, the safeguarding procedure for 26 major stores in France raises questions about the company’s attractiveness at the national level. 

In China, the joint venture aims to open 10 major stores by 2025, with three more planned in Shenzhen, Chongqing, and Macao by December.

In France, an update occurred on April 19 at the Bordeaux Commercial Court after 25 major provincial stores were placed under a safeguard procedure in late February. These stores have been managed by HPB, the retail branch of Michel Ohayon's group, since 2018. The safeguard procedure allowed the cancellation of debts, including €40 million in merchandise, but requires continued payments to suppliers. Michel Ohayon's plan foresees repaying €700,000 per month starting in March 2024, which seems high to some employees. They worry about generating more profit in 2024 than in 2019, before the Covid pandemic.

With four months left to find buyers, the potential takeover of these stores raises concerns due to the size of the assets, required maintenance, and the low attractiveness of some locations. The situation becomes a national issue as it affects the attractiveness of 26 city centers across the country.

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