Nakheel abandon plans for 55 Auchan stores across the Gulf

The Dubai developer has pulled out of a joint venture with the French hypermarket chain because of the economic climate, Auchan says.

Auchan closed its hypermarket at the Dragon Mart in International City in Dubai at the end of last year after barely 12 months.

The Dubai developer Nakheel has pulled out of a joint venture with the French hypermarket chain Auchan because of the economic climate, Auchan says.

Auchan closed its hypermarket in Nakheel's Dragon Mart at the end of last year after Nakheel said it did not want to proceed with their joint plans to open 55 stores across the Gulf over 10 years, said Leandre Boulez, a director of Auchan and one of the board members of Auchan Dubai.

"The first store opened and it grew progressively, but because of the economic situation Nakheel decided to review its position regarding the development of its own retail activity. And so they have decided not to continue with this franchise."

Nakheel was not available for comment.

It entered the partnership with Auchan in mid-2008 and planned to spend at least US$800 million (Dh2.93 billion) over the next decade opening 15 hypermarkets and 40 supermarkets across the Gulf.

The joint venture company was to open as many as 40 stores in Dubai alone in Nakheel's developments, starting with Dragon Mart, a large Chinese-themed mall in International City, and later on the Palm Jumeirah, Palm Deira and Jumeirah Village. It opened an Auchan hypermarket in Dragon Mart in mid-2009.

Nakheel later faced big hurdles after the financial crisis hit Dubai. It postponed construction on retail projects such as the mall on the Palm Jumeirah and the extension of Ibn Battuta Mall. But the developer has said it plans to resume work on at least four of these shopping malls this year.

In March last year Dubai World's retail arm, Nakheel Retail, later known as Retailcorp World, dropped many of its other brands as part of a radical overhaul of the company.

It closed its Lamborghini-branded cafes and cancelled plans to bring the US gourmet grocery chain Balducci's to the region.

Its parent company, Dubai World, asked in November 2009 for a standstill on its payments to contractors. Dubai World reached a final agreement last September with its bank creditors to restructure $24.9bn of debt. Nakheel is in the middle of its own plans to settle claims by contractors.

Mr Boulez said Nakheel's decision to pull out of the hypermarket venture was made in September last year.

"It's a loss of an opportunity for us but it has happened [before] that we have entered and closed relationships with partners here and there," he said.

"It's a situation but it's not a very big issue for us."

Mr Boulez said it was too early to say whether Auchan would try to re-enter the Gulf with another local partner.

Auchan has 537 hypermarkets and 732 supermarkets in 12 countries across Europe and Asia.