EUROPE PRIME TARGET FOR PROMODES

KATHERINE WEISMAN

PARIS -- While other retailers and distribution companies here are looking outside Europe for growth, Promodes is making Europe its priority. "We are focused on Europe," said Paul-Louis Halley, Promodes chairman, at the company's annual meeting here earlier this month.

Promodes, the Mondeville, France-based operator of Continent and Continente hypermarkets, Champion supermarkets and other stores, is keeping its concentration on Europe despite a 9% sales drop last year in Germany, where Promodes has hypermarkets. "It's easier to exploit synergies in one big common market" rather than trying to adapt to non-European cultures and languages, Halley said.

Creating efficiencies in one geographic region enables profits to grow more quickly, Halley said. Part of the European strategy included last year's sale of its Red Food Stores subsidiary in the United States to Royal Ahold of Zaandam, the Netherlands. The European strategy, however, does not mean that Promodes is ignoring far-away markets. On the contrary, the company opened its first wholly owned Continent store outside Europe last January in Tainan in Taiwan. It also opened the first hypermarket on the island of Mauritius last fall. Continent also has stores in Casablanca and Rabat resulting from an agreement with ONA, Morocco's largest private conglomerate. Promodes is even eyeing South America and Southeast Asia, where some of its competitors, like Carrefour, are already operating. But Halley warned that this "will not become significant before the year 2000." At the annual meeting, administrative and financial director Guillaume Gasztowtt announced that sales volume of all stores -- wholly owned, franchised, or owned in partnership -- rose 15% last year to $29.3 billion (146.7 billion francs) at an exchange rate of five francs to the U.S. dollar. Consolidated sales rose 13% to $18.9 billion.

Roughly 65% of sales are concentrated in France and French territories. Operating profit rose 13.3% to about $460 million, and net profit rose 28.4% to $180 million. The strongest sales volume growth rate, 369%, was achieved in Greece, where Continent has been operating since 1991 and now has four stores whose volume reached nearly $1 billion. Germany was the only market where sales declined, falling to $1.6 billion. Two money-losing stores were closed in a market where spending on food declined 2% last year. In terms of operations, hard discount activities and cash and carry operations both posted volume growth of 14.6% to $1.7 billion and $2.6 billion, respectively. Hypermarkets registered a volume increase of 5.7% to $14.2 billion, while supermarket sales rose 4.6% to $7.02 billion. Neighborhood and convenience store sales rose 5.3% to $3.6 billion.