PARIS — Galeries Lafayette Group said sales were down 6 percent in the first half as foreign visitors shunned Paris in the wake of a series of terrorist attacks, and the French department store chain’s performance continued to worsen over the summer and back-to-school period.
Nicolas Houzé, chief executive officer of Galeries Lafayette Group’s department store division, said revenues totaled 1.6 billion euros, or $1.79 billion, in the first six months of the year, versus 1.7 billion euros, or $1.9 billion, in the same period a year earlier. Dollar rates are calculated at average exchange rates for the period.
Foreign visitors account for roughly 50 percent of revenues at the flagship Galeries Lafayette store on Boulevard Haussmann, one of the city’s top tourist attractions. The group operates another 56 Galeries Lafayette stores across France, in addition for four BHV Marais units.
“The local customer base proved fairly resilient, with sales practically stable at Galeries Lafayette and from French customers at Haussmann. On the other hand, we saw a drop of around 15 percent in international visitors at the Haussmann store,” Houzé told reporters on Wednesday.
“For the summer and the back-to-school period, we have seen the negative trend become more pronounced, with a drop of 20 percent in sales to international customers. Sales to local customers have dipped into negative territory since August and have remained there in September so far,” he added.
French Foreign Minister Jean-Marc Ayrault announced on Tuesday the government was raising its emergency fund aimed at promoting tourism to 10 million euros, or $11.2 million, from 1.5 million euros, or $1.7 million, in light of an 8 percent drop in visitor numbers so far this year.
“It’s a start,” Houzé said. “Today, we have a security issue in France, but that security issue is relatively global. France, and Paris, and Galeries Lafayette remain a dream destination and therefore we are convinced that international visitors, and namely Asians, will eventually return to Paris.”
Despite the negative environment, the executive maintained his target of doubling the group’s profitability by 2020 and making investments of 150 million euros, or $168.5 million at current exchange, per year.
Galeries Lafayette expects to increase turnover at the Boulevard Haussmann store by 8 percent once it starts opening on Sundays, beginning in early 2017. As it prepares to launch a five-year remodeling of the flagship next year, the retailer plans to open a dedicated space for Chinese tour groups across from the main store.
The 28,000-square-foot unit, spanning two floors, is set to bow in early 2017 and will carry beauty, accessories, watches and jewelry, sunglasses and personal hygiene products. Galeries Lafayette is working with public transport operator RATP and City Hall on reopening a disused tunnel linking it to the main store.
It is also set to start construction next year on its flagship on the Avenue des Champs-Elysées, scheduled to open in September 2018. Houzé said the store would carry fewer products and offer more digital services.
As part of its Ambitions 2020 plan, the retailer is steaming ahead with plans to increase the proportion of online sales from a forecast 2 percent of revenues at the end of 2016 to 10 percent by 2020. It recently named Constance de Polignac as marketing and digital director and in recent months has purchased luxury goods reseller Instantluxe.com and online private-sales site BazarChic.
Galeries Lafayette plans to expand its network of outlet stores in France from three at present to 10 by the end of 2017. Next year, it will open its first new store in France since 2007 at the Prado shopping center in Marseille and unveil renovated stores in Cannes and at the Carré Sénart mall in Lieusaint.
The group is also looking to add another five locations overseas by 2020 with local partners in China and the Middle East, Houzé said. The retailer has opened locations in Berlin; Dubai; Jakarta, Indonesia, and Beijing in recent years, and is plotting future units in Doha, Qatar; Istanbul and Milan.
Houzé said sales at the Beijing store totaled 100 million euros, or $111.6 million, in the first half, up 15 percent year-on-year and ahead of target. The Dubai store logged equivalent sales in a highly competitive environment, while the Berlin store celebrated its 20th anniversary with stable revenues, he added.