Gerard Mulliez' Auchan: France's Wal-Mart Goes Global

Paris - Gérard Mulliez is France's Sam Walton: a frugal, plain-talking, small-town entrepreneur who parlayed a single storefront into a sprawling empire. And just as the Wal-Mart Stores (WMT) founder once did, he's shaking up the world of retailing.

Mulliez is patriarch of a secretive family that controls one of the world's biggest retail operations, with more than 7,000 stores and annual sales of some $95 billion. The family's two-dozen-plus companies include Auchan, a Wal-Mart-like big box; Decathlon, the world's biggest sporting goods retailer; and the European and Latin American operations of Midas (ADS) muffler. And they're gaining ground against competitors, especially in emerging markets, which hold the key to growth as sales in the U.S. and Western Europe have flattened.

With an estimated $22 billion fortune, the clan is France's wealthiest family. But its leaders go to extremes to avoid publicity. "It's astonishing how little is known about them," says Benoît Boussemart, an economist who published a book on the family last year after Gérard Mulliez ("Mool-YAY") filed an unsuccessful lawsuit to block publication. Mulliez and leaders of the family's major companies either did not respond to or declined Bloomberg BusinessWeek's interview requests.

Even most French people don't realize the extent of the family's hold- ings. True, $95 billion in sales pales next to Wal-Mart's $405 billion. And it's a good distance behind the $145 billion sales of the global No. 2 retailer, France's Carrefour. But it's neck-and-neck with Britain's Tesco and Germany's Metro, which round out the world's top five retail groups.

In China, Auchan is outperforming rivals by appealing to upwardly mobile shoppers. While Carrefour has designed its stores to mimic raucous street markets, Auchan outlets are more organized. Each of its 145 stores there averages $45 million in annual sales, vs. $26 million for Wal-Mart's mainland outlets, estimates consultancy Planet Retail. Wal-Mart's emphasis on rock-bottom prices "has backfired with Chinese shoppers" who often assume cheaper goods are counterfeit or dangerous, says Shaun Rein, managing director of the China Market Research Group in Shanghai.

Mulliez companies are on a roll in Russia, too. Seven years after opening its first Moscow outlet, Auchan is Russia's top foreign hypermarket operator, with 34 stores and roughly $6 billion in sales this year, Planet Retail says. Wal-Mart and Tesco aren't in Russia, and Carrefour pulled out this fall, only weeks after opening its first two stores there. Now, Decathlon and the family's Leroy Merlin home-improvement chain are piling into Russia. They're getting help from yet another Mulliez business, real estate group Immochan, an Auchan subsidiary that buys property for the family's companies.

NEAR-INVISIBLE NETWORKBecause Auchan is the only Mulliez outfit to publish an annual report, economist Boussemart pored over documents filed with local French authorities. His finding: The empire is remarkably strong. Most of the companies are nearly debt-free. Decathlon, Leroy Merlin, and others have posted double-digit sales and earnings growth for years. Auchan saw sales flatten this year after rising 7.5% in 2008, to $59 billion, but Carrefour and Metro have fared worse.

The network that binds the Mulliez businesses together is strong but nearly invisible. Although legally separate, all are controlled by an extended clan of about 550 people. Now 78, Gérard Mulliez retired from active management in 2006, but his son and various cousins, nephews, and nieces hold top posts in nearly all the businesses. All are privately held, and most are based in the faded industrial region near the French-Belgian border town of Roubaix, where Mulliez opened the first Auchan store in 1961. A family pact lets members trade shares among themselves but bars sales to nonrelatives, so there's no pressure from outsiders seeking quick returns. In some companies, employees are offered shares, but never more than 15% of the total.

The Mulliez family got its start in textiles more than 200 years ago. But by the mid-20th century, that industry was fading, and the younger generation was eager to branch out. Gérard, then 29, set up the first Auchan in an abandoned Roubaix factory after becoming convinced that suburban stores with big parking lots would kill traditional downtown shopping.

The clan is notoriously tightfisted. "You never see them in St. Tropez or buying expensive paintings," says Bertrand Gobin, an author who writes a blog tracking the family. Gobin, who in 2004 was granted a rare interview with Gérard Mulliez, recalls that the patriarch's office was unheated and furnished with a cheap desk, a few chairs, and a table with a sheet thrown over it as a dust cover. The interview lasted five hours, Gobin says, without Mulliez offering so much as a glass of water or even a bathroom break.

For all its retailing prowess, the family has been stymied in the U.S. and Britain. Auchan and Decathlon each opened a handful of U.S. stores in the 1980s and 90s but later pulled out. Rug retailer Tapis Saint Maclou won a bidding war for Britain's Allied Carpets in 1999 but resold the business this year after sales slumped.

That hasn't dulled the family's appetite for global expansion. Auchan is now opening its first stores in Ukraine while pushing into the Persian Gulf. It plans to raise money for China with a stock listing for a retail joint venture with Taiwan's Ruentex Investment Group. And Decathlon, after years of lackluster performance in Britain, hopes to capitalize on the 2012 London Olympics by opening at least five new British outlets before the Games. "We've had a few years now to adapt our business model," says Stéphan Veyret, Decathlon's British property director. "We think we've found the right recipe."

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