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This is the impact of Carrefour's exit to Singapore's retailer market
Dairy Farm takes Carrefour's spot while Sheng Shiong's Verge may benefit from the closure.
According to Maybank Kim Eng, French hypermarket retailer, Carrefour, will be shutting down all of its operations within Singapore which comprise two outlets at Suntec City and Plaza Singapura, by year-end. Dairy Farm’s hypermarket arm, Giant, will replace Carrefour as anchor grocer, taking a 60,000 sq ft shop space in a separate location at Suntec City, marking its 10th outlet in Singapore.
Here's more from Maybank Kim Eng:
Intention to leave announced earlier. This is not surprising, as Carrefour had announced a scaling back of its operations in Malaysia, Thailand and Singapore in early 2010. Carrefour sold its Thai operations to rival Big C Supercenter in late 2010 for THB35.5bn, implying an FY10 EV/EBITDA of 8.6x, including run-rate synergies. The pullout reemphasises the difficulty of penetrating Singapore’s retailer market and the importance of managing operating costs in a high rent environment.
Spillover effects from Plaza Singapura to Verge. It is unlikely that Sheng Siong will bid for Carrefour’s Plaza Singapura’s outlet as it does not fit its store criteria. The Plaza Singapura shop space is around 81,000 sq ft at an estimated rental cost of SGD6.5-7psf, higher than the group’s current average rental. Instead, Sheng Siong’s hypermarket, Verge, a 10-minute walk from Plaza Singapura, may benefit from the closure as former Carrefour customers seek out new shopping outlets.
Store openings on track. Sheng Siong’s Bukit Batok outlet (4,200 sq ft) began operations in August. The group also signed lease agreements for two outlets in Bedok North (3,000 sq ft) and Yishun (5,000 sq ft), which will commence operations in 4Q12. By year end, the group will have 31 stores with a store area of approximately 391,000 sq ft.
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