European Retail Mergers Are Slowed by Economy, EuroCommerce Says

Merger activity involving European retailers will remain subdued as the financial crisis continues to weigh on consumers, according to EuroCommerce, a group representing the region’s retailers.

“What you’ve been seeing is that merger activity has been slow in last three or four years in all sectors,” Lucy Neville-Rolfe, president of EuroCommerce, said in an interview in Lisbon today. “It will come back but I’m not sure confidence is yet quite strong enough for people to feel that they are going to make those financial gains that tend to be a feature of that kind of activity.”

To counter a weak economy in Europe and a drop in consumer confidence, companies such as Carrefour SA, France’s biggest retailer, are expected to continue expansion in emerging markets, including South America, said Neville-Rolfe, the former head of corporate governance at Tesco Plc who took up her post at EuroCommerce last year.

There are opportunities overseas, said Neville-Rolfe, whose association represents six million companies that employ about 33 million workers in the EU retail sector. “We’ve been doing a good job investing in Latin America, for example, in the case of Carrefour.”

While consumer confidence is still “bumping along the bottom,” decisions by EU leaders late last year have helped stabilize things and this year may be a “turning point” for the industry, said Neville-Rolfe.

“It would be wrong to think of an early recovery, but you are beginning to see markets looking a bit more optimistic and that’s usually a good sign,” she said.

Some retailers in the U.K. have gone out of business while others have cut costs and adapted to the economic slowdown by promoting and selling their products online, she said.

“There are some areas of continued growth and a very obvious area is e-commerce,” said Neville-Rolfe. “That is the sort of direction that you will see things going.”

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