Luxury boom brings Galeries Lafayette back to China

15:18, November 26, 2010      

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Beijing-based property company Financial Street Holding Company announced in Hong Kong on Nov. 25 that its wholly-owned subsidiary Beijing Jinsheng Real Estate Development Company and Galeries Lafayette (China) have signed a 20-year property lease agreement. Under the agreement, the high-end department store operator Galeries Lafayette will open a chain department store in the Xidan Plaza of the Financial Street area, the first one in Asia.

Galeries Lafayette (China) is a 50-50 joint venture established by French Galeries Lafayette and Hong Kong-based IT Limited. The Xidan Plaza of the Financial Street area is located on Xidan Street North inside Beijing's prime commercial district.

A commercial area totaling about 50,000 square meters will be completely leased to Galeries Lafayette (China) for 20 years. The Galeries Lafayette department store in Beijing is estimated to complete construction at the end of 2011 and start operations in 2013.

According to Financial Street Holding Deputy General Manager Gao Liang, the company will use a certain percent of sales revenue of the Galeries Lafayette department store in Beijing as the rent, but he did not disclose the specific percentage.

Financial Street Holding recorded nearly 200 million yuan in revenue from its property lease business in the first half of 2010, which represents a gross profit margin of more than 91 percent and accounts for 11 percent of its main business revenue.

The joint venture plans to invest 300 million yuan in the Beijing store, and Philippe Houze, chairman of Galeries Lafayette, said the group will open 10 to 15 more stores in China in the next few years. In fact, many Chinese consumers have shopped at the stores in France so they are quite familiar with Galeries Lafayette.

Galeries Lafayette now operates 61 department stores, with a combined area of 500,000 square meters. Its retail sales (including value added tax) totaled nearly 2.6 billion euros in 2009.

However, Galeries Lafayette had met its Waterloo in China in the mid-1990s. The retail giant once opened a store on Wangfujing Street, but had to close down due to its inability to profit just after one year. Insiders believe that the purpose of Galeries Lafayette's cooperation with IT Limited, which is more familiar with the Chinese mainland market, is to avoid falling into the same old trap again.

By People's Daily Online


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