PROMODES GOAL: KEEP UP WITH THE PACK

KATHERINE WEISMAN

PARIS -- Promodes, one of the leading French retail groups, has laid out its challenge for the future -- to keep pace with fast-growing competitors.

Paul-Louis Halley, chairman, said at the recent annual meeting here that Promodes wants to keep pace with other retailing groups while simultaneously increasing its profitability.

"The thinking used to be that you had to grow to your maximum size," Halley told shareholders. This is no longer a valid strategy, he said.

"Now we are calling these old ideas into question. It's clear that you must grow as fast as your competitors," he said. "In addition, generating strong profits has become more important."

Promodes, which operates store formats ranging from hypermarkets to convenience-style stores, reported a 26% jump in net income in 1993 on a 7% increase in sales. Income reached $125.2 million (701 million francs at 5.6 francs to a $1); sales totaled $16.1 billion (90.2 billion francs).

Operating profits increased 17.2% to $375 million in 1993.

"These results show an improvement in our efficiency," Halley said in the company's annual report. "The increases did not come from a slackening of our price-competitiveness."

Promodes' operations included 168 hypermarkets under the Continent banner, 586 Champion supermarkets and more than 1,500 Dia hard-discount stores at year-end. Sales at Continent hypermarkets accounted for nearly half of Promodes' volume last year, while Champion and other supermarket banners represented about a quarter of net sales.

Continent continued to expand in both France and other French regions and achieved a 10% sales increase to $5.9 billion last year. Growth was helped in part by Continent's continued attention to the competitiveness of its prices and to improvements in services, the company said.

In Spain, Continent's sales rose 13% in local currency to about $2.9 billion. Germany was a tougher market, due to the lingering recession there, Promodes said. Sales were flat at $1.6 billion.

After acquiring the Plaza chain in Germany in 1990, Promodes remodeled the stores using its Continent format.

"We have stabilized the situation in Germany. Now we have to make it profitable," Umberto Guida, chief operating officer of Promodes, said at the annual meeting. "We are too small there. We could buy another company, but even better would be to form a strategic alliance with a German group that wants to expand outside of their home market."

Guida also said Promodes needs to rethink its neighborhood store concept, mainly as a response to the influx of deep-discount stores in French cities. In the past, discount operators concentrated their businesses in the suburbs, but this is changing.

The management team at Promodes want to grow the company by both building existing operations and expanding in Europe. But they are cautious.

"If the group wants to remain a leader, it has to grow 15% a year," Guida said. "But it has to be cautious growth. Those companies that have failed are those who grew badly or too quickly."