- The Edge Weekly reported that Galeries Lafayette, the leading French department fashion retailer (>60 stores in France with >3,500 brands), is seeking an entry into Malaysia. The press said that Galeries Lafayette has been making several trips to Malaysia to look for suitable locations in Kuala Lumpur, Penang and Johor.

- It was also reported that the weak consumer spending in France has lead Galeries Lafayette to target expansion in emerging markets. This is evident following its recent re-entry into Indonesia and China (store sizes ranges between 120,000sf-150,000sf). Other international presence includes Dubai and Casablanca, with upcoming stores in Qatar and Turkey next year.

- It does not come as a surprise if Malaysia is the next point of expansion. Over the years, Malaysia witnessed a growing trend of emerging international retailers making their maiden foothold in Malaysia in tandem with the rising number of new shopping malls, particularly within Klang Valley.

- Should this materialise, we believe that Galeries Lafayette intends to initially open its stores within the prime shopping area in Kuala Lumpur, to complement other high-end stores (i.e. Pavilion Mall, Starhill Gallery and Suria KLCC). Its expansion strategy is also likely to centre on high traffic and affluent areas.

- Its entry, we believe, would excite the Malaysia retail market due to the variety of brands (>3,500 brands offered in France), as majority of these are not available in Malaysia. Department store players like Parkson and international retailers such as H&M are likely to be hit by the more crowded playing field in the retail landscape.

- Given its large retail space requirement, the limited floor space availability could pose a challenge. Notwithstanding this, seven new malls are estimated to be opened in Klang Valley this year with another five to be refurbished (+5mil sqft of net lettable area). In central Kuala Lumpur, Quill City Mall (previously known as Vision City) and The Four Seasons Place are expected to open in 2014 and 2016/2017, respectively. We do not rule out the possibility of Gallerie Lafayette being highly sought after as an anchor tenant, underpinned by its established up-market brand names and crowd-pulling advantage.

- We reiterate our NEUTRAL stance on the consumer sector. Within the retail sub-sector, we have a HOLD on Padini Holdings (FV: RM1.80/share) and a SELL on Parkson Holdings (FV: RM3.00/share). As for the F&B sub-sector, we have BUYs recommendations for both Berjaya Food and Cocoaland Holdings with unchanged fair values of RM2.30/share and RM2.85/share, respectively. 

Source: AmeSecurities