REAListic prospect of conflict

Retail & leisure
POLAND Auchan Poland has completed the halfway stage of its rebranding of the network of Real hypermarkets it has recently acquired from Metro.

However, the process has not been straightforward. It is possible that some stores might even be closed down, say representatives of the French company. Eight more contracts have been signed by the French group with operators for the rebranding of Real stores in Bydgoszcz, Kraków, Toruń, Janki, Warsaw, Wrocław, Łódź and Szczecin, bringing the process up to the halfway point. “Contracts have now been signed with Atrium, Pradera, IVG, Mayland and Black Rock,” Dorota Patejko, the communications director of Auchan Polska, has informed us. “The negotiations that have ended with the signing of contracts are for stores located in malls belonging to Valad,” she adds. However, some owners of the malls in which Real hypermarkets operate have so far been unwilling to agree to the conditions offered by the French group. “The terms offered by Auchan are unacceptable. Unless they show more flexibility, it will be difficult for us to reach an agreement,” said a representative of one of the companies negotiating with Auchan, who wishes to remain anonymous. The rent obligations acquired by Auchan together with the 57 Real stores in Poland amount to EUR 636 mln, representing 10 pct of the hypermarkets’ operating costs. Auchan wants to reduce this to 3–4 pct. “Since the acquisition of Real by Auchan, we have been explaining that the main challenge is to rescue Real Polska, which is on the verge of bankruptcy because of rents two- or three-times higher than the market rate. This has contributed to high prices of goods in Real stores and significant losses in terms of turnover and market share,” claims Dorota Patejko.

Tough negotiations

“In a situation where the majority of negotiations are very advanced, in the spirit of the same long-term vision which is based on the stable future of both parties and guaranteeing employment to the workers, there is a great risk of conflict with the Apollo Rida fund argues the representative of Auchan. “According to market sources, the fund has decided to sell part of its portfolio, that is, twelve locations. In our opinion, provided that this is eventually confirmed, this decision has not been made taking into consideration the difficult status of the locations and our proposals for these twelve stores, which made losses of EUR 30 mln in 2014. This puts the future of the facilities into question. It is obvious that our priority is to find a solution in order to guarantee the employment of the staff, but in the current conditions this seems impossible because of a one-sided decision and the inability to start partner negotiations with Apollo Rida,” she adds. It is not out of the question that the company could close down some of the Real stores. “It is certain that in such a situation the twelve Real stores will not become Auchan hypermarkets. In the current conditions the stores do not have any prospect of continuing as hypermarkets. The case could go court, at the initiative of Apollo-Rida, which would not be an understandable move, considering the fact that it is the fund that is selling the facilities, while we have declared the will to start negotiations on many occasions, which should involve both parties making concessions,” claims Dorota Patejko. Apollo-Rida has expressed surprise at the turn the situation has taken. In response to questions asked by our editorial team, the fund says: “Apollo Rida is the owner of 25 facilities anchored by Auchan. The company has very good relations with Auchan, so there is no conflict whatsoever. Of course, we are considering selling the stores, but these plans are in the future, as there are no actual negotiations at this time,” explains the company. “Auchan is a conservative and well-established company. The acquisition of Reals in Russia, Ukraine, Romania and Poland will certainly strengthen its position in the region. The scale of its operations on the Polish market will certainly facilitate strong competition, not only with other hypermarket chains but also with discount stores. We have already noted this, for example, by analysing the footfall in the stores,” adds Rafał Nowicki, the president of Apollo-Rida. According to our findings, the Warsaw commercial court has dismissed the claims of A-R-A Retail Centers (part of the Apollo-Rida group) to establish collateral for the payment proceedings. The defendant is Real. Apollo-Rida has declined to comment on current moves related to negotiations with Real/Auchan. However, the fund emphasises that it is interested in good relations with the hypermarket chain. Meanwhile, market sources (all anonymous) are saying that the firm stance and suggested closure of some of the Real hypermarkets are part of the negotiation strategy of Auchan, particularly when it comes to the owners of stores who have agreed shorter leases or want to sell their facilities in the near future.