Lafayette, Here You Are

Galeries Lafayette SA (Paris), the French department store group, has announced that it is in “the final round of talks” to acquire the 19 French outlets of British retailer Marks & Spencer (London). A rival bidder, the French retail conglomerate Pinault Printemps Redoute SA, withdrew from the race more than a week ago.

Five of those stores will be taken over by Hennes & Mauritz H&M (Stockholm), the Swedish clothes retailer. The five stores include two just outside of Paris and one each in Reims, Nantes and Lille. Each of the stores will measure about 16,000 square feet. Furthermore, H&M executives hint that the company might acquire even more of the Marks & Spencer property in France. Galeries Lafayette had indicated from the beginning an intention to hang onto only five or fewer of the former M&S property and sell or lease the rest. One of the stores it plans to keep is almost certainly the flagship M&S store on the Boulevard Haussman in Paris, and probably two other Paris stores. It also reportedly plans to hold on to a pair of outlet stores in Strasbourg and Bordeaux.

Galeries Lafayette is best known internationally for its famous Paris flagship store, but the company also runs BHV (home furnishings) and the Monoprix and Prisunic hypermarkets, which sell groceries and moderately priced clothing, furniture and cosmetics. Its stock price has fallen nearly in half since September 2000, and analysts are skeptical about strategic benefits of the new purchase. They point out that the total revenues of the 19 M&S stores last year were one-third of Galeries Lafayette's flagship store alone.

Nobody's skeptical about H&M, the “cheap chic” phenomenon that is currently on track to open 100 stores per year, including locations in new markets in Spain and the U.S.

Marks & Spencer has been on a campaign to sell off all of its non-U.K. retail holdings, including its Brooks Brothers and Kings Supermarket operations in the U.S.