CARREFOUR PLANNING HYPERMARKET GROWTH IN BRAZIL

MICHAEL KEPP

RIO DE JANEIRO, Brazil (FNS) -- The French-owned Carrefour supermarket chain, Brazil's biggest, plans a major expansion in the country -- particularly in Sao Paulo, where Wal-Mart is making inroads. Carrefour, with 13 of its 38 Brazilian hypermarkets in Sao Paulo, said it would open 12 new stores in Sao Paulo during the next three to four years, its biggest one-city expansion in Brazil. Each hypermarket costs roughly $15 million, so the investment would be about $180 million.

This year, Carrefour plans to spend $90 million to $100 million of a $300 million total investment to open six hypermarkets nationwide. Three of the stores are in Sao Paulo (the first opened May 21), two will be in the Southern state of Rio Grande do Sul and one will be in the city of Recife, which would represent Carrefour's first store in the Northeastern region.

The expansion is an update of an earlier plan. In February, Carrefour had announced that it would open five hypermarkets this year in Brazil as part of a $200 million investment.

A Carrefour spokesman said the Paris-based retailer was expanding more quickly in Sao Paulo than in the rest of the country because the city -- whose metropolitan area has a population of more than 20 million -- presents a demographically dense market.

In entering Brazil, Bentonville, Ark.-based Wal-Mart Stores chose to set up shop first in Sao Paulo for similar demographic reasons, opening two supercenters and two Sam's Clubs there last year. Both Wal-Mart and Carrefour are opening new stores in the same Sao Paulo neighborhoods -- and sometimes right next door to each other.

However, the Carrefour spokesman noted that Wal-Mart's arrival in Sao Paulo is not why the French-owned chain is expanding more quickly there.

"We see Wal-Mart as just one more competitor," he said, adding that Carrefour tries to offer prices 10% lower than the competition's. Beginning in February, Carrefour has followed Wal-Mart in Brazil by offering special sale prices on back-to-school items.

In Brazil, Carrefour registered $4.9 billion in revenues last year, a 19% increase over 1994 results, and had $159 million in net operating profit, a 24% increase from the year before.