GiFi S.A.



Zone Industrielle La Boulbene, BP 40
Villeneuve-sur-Lot F-47301 Cedex
France
Telephone: +33 5 53 40 54 54
Fax: +33 5 53 40 54 6433
Web site: http://www.gifi.fr

Public Company
Incorporated:
1981
Employees: 2,487
Sales: EUR 440 million ($500 million) (2004)
Stock Exchanges: Euronext Paris
Ticker Symbol: 7509
NAIC: 424990 Other Miscellaneous Nondurable Goods Merchant Wholesalers; 423990 Other Miscellaneous Durable Goods Merchant Wholesalers

GiFi S.A. is France's leading retailer specialized in the low-priced, nongrocery category. The company, based in Villeneuvesur-Lot, in the French southwest, operates a network of nearly 275 discount stores featuring a wide range of items, from home furnishings to toys to hardware, as well as textiles, auto parts, electronic goods, and compact discs and DVDs. Nearly three-quarters of the goods on sale at the group's stores are priced at EUR 4 or less. In a departure from the traditional discount goods channel, GiFi has launched its own branded lines in certain categories, including pet products (Doggy Dog), kitchen utensils (Cuisilux), and toys (Joubi). The company claims that more than 45 percent of the goods sold in its retail network originate from suppliers in France; most of the remainder come from Asian, especially Chinese, producers. GiFi has expanded rapidly in the first half of the 2000s; since 2000 the company has doubled its retail network. The company also has launched a refurbishment effort, converting a number of stores to a new large-scale Maxi GiFi concept, featuring more than 2,500 square meters of selling space. At mid-decade, the company has begun a move into international markets, acquiring 27 Idé stores in Belgium, and opening its first stores in Italy. The company also is preparing a launch into Spain. At the same time, GiFi has begun to diversify, acquiring discount clothing supplier Griff Plus in France. That acquisition brought the company a chain of 25 stores specialized in the sale of discounted brand name clothing. GiFi is listed on the Euronext Paris Stock Exchange. Founder Philippe Ginestet and family control more than 56 percent of the company's shares. In 2004 the company posted revenues of EUR 440 million ($500 million).

Discount Retailer in the 1980s

Philippe Ginestet's father sold animals in France's markets, exposing the younger Ginestet to the retail market at an early age. Yet Philippe Ginestet quickly displayed a talent especially for buying goods, seeking out the best prices, which he later resold at a profit. Later, in the 1970s, Ginestet went to work for Electrolux as a door-to-door salesman. There, Ginestet won an award for being the appliance giant's best salesman.

Ginestet's wife, however, was at the origin of Ginestet's conversion into one of France's leading retail entrepreneurs. In 1981, Ginestet's wife was seeking her own career direction. As Ginestet told Le Passant Ordinaire, "She was looking for something to do, so I bought her a store."

The Ginestets put together their savings, all of FRF 100,000 (approximately $10,000), and began seeking a location for their store near their home in Villeneuve-sur-Lot. The high rents of the city center, however, led the couple to the outskirts of town and the newly developing shopping district there. The Ginestets decided to launch a business as a "soldeur"—that is, selling end-of-range and de-stocked items—which at the time was a relatively new retail category. The Ginestets used Philippe Ginestet's name to form the name of their store: GiFi. The company then adopted the slogan: "Gifi Le Vrai Soldeur."

"At the time," Ginestet told L'Entreprise, "all one spoke about was the crisis and saving money. We therefore chose to surprise (our customers) with our prices and our choice of items." The Ginestets' choice proved a good one—by the end of its first year, the store had generated more than FRF 4 million in revenues. Ginestet quickly invested the steady stream of revenues into expansion, opening the second GiFi store just six months after the first. The strong sales at the GiFi stores also enabled the company to obtain credit from its suppliers, which in turn allowed it to turn a significant share of its revenues toward the opening of new stores. The growing network of GiFi stores provided the company with increased purchasing muscle; as its volumes increased, the company was able to negotiate still lower prices.

The company soon opened its fourth store, which marked a new milestone in the company's development. As Ginestet explained: "Until then, we'd operated within the family. But with the fourth store, I needed to create a team." Seconded by a team of managers, Ginestet stepped up the company's store openings. By 1986, the company operated nine GiFi stores.

By then, however, Ginestet had recognized the limits of the "soldeur" concept, which left the company dependent on locating and negotiating for unsold stock. This meant that the choice of what appeared on its store shelves was often beyond the company's control. In 1986, therefore, Ginestet decided to convert GiFi's retail model to a low-priced formula. The company now turned directly to manufacturers and other wholesalers in order to build a more complete range of home furnishing goods and other nonfood items. As Ginestet explained to Dynamique Commercial: "Between 1984 and 1988, a new concept appeared, that of factory outlet stores. I modified my format and Gifi Le Vrai Soldeur became Gifi Center. We made our purchases from wholesalers, remaining with the areas of gifts, decoration, toys, household textiles."

Ginestet's intuition proved correct, and GiFi now entered a new phase of growth. Just two years later, the company had nearly tripled its store network. With 25 stores in operation, GiFi established a dedicated purchasing and distribution center in 1988. The new facility also provided the group with a more solid infrastructure as it pursued continued growth. Also that year, the company began purchasing operations in the Asian markets, often sourcing its goods directly from manufacturers.

National Network in the 1990s

These new supply channels enabled GiFi to move closer toward a department store concept (referred to by the company as product "families"), expanding its range of goods into a more and more complete assortment. The wide range of products, coupled with the difficult economic climate at the beginning of the 1990s, positioned GiFi and its low-priced concept as a fast-growing consumer favorite.

GiFi's retail network had reached 50 stores by 1993. In that year, the company added a number of new categories, notably textiles and cleaning and household products. The company continued adding new stores, topping 70 at mid-decade. By 1996, the company's sales had reached the equivalent of EUR 88 million. Yet GiFi remained more or less confined to the southwest region.

The company now put into place a strategy to launch it onto a national level. A key component of that strategy was Ginestet's willingness to bring in outside capital. In 1996, Ginestet organized a leveraged buyout of the company, selling 55 percent of the company to an investment partnership between Apax Partners & Cie and Fonds Partenaires du Groupe Lazard. The Ginestet family retained 45 percent of the company.

The company's new financial partners permitted GiFi to accelerate its growth. In just three years, the company nearly doubled its retail network again, becoming a nationally operating chain with nearly 130 stores by the end of 1999. The company's sales also had grown strongly, nearing the equivalent of EUR 150 million.

An important feature of the group's growth, and one that set it apart from most of its discount goods competitors, was the decision to launch a number of its own brands in the mid-1990s. As such the company added a line of pet products under the Doggy Dog brand. The company began selling a line of kitchen utensils, creating the Cuisilux brand. Last, GiFi added its own line of toys, called Joubi.

Going International in the 2000s

The 2000s marked GiFi's maturation into one of France's major retailing groups. Fueling the company's growth was its public offering, with a listing on the Euronext Paris Secondary Market in 2000. The listing reduced the stake held by Apax and Lazard by half. The public offering also gave Ginestet the opportunity to regain majority control of the company. After boosting his holding initially to 51 percent, Ginestet continued buying up blocks of shares in the company. By 2005, the Ginestet family's shareholding in the company had topped 56 percent.

Ginestet's confidence in the company's business model appeared well-founded. By 2002 the company had expanded its store network to 175 stores. GiFi also adopted a new strategy of extending its retail format to an international market. The company first targeted the French overseas departments, opening stores in Guyana and Guadeloupe. At the same time, GiFi maintained its store opening pace in France proper, extending its network to more than 200 stores by 2004.

Yet by then the company's international strategy had taken on still greater substance. In mid-2003, the company acquired a 50 percent stake in Idé, which operated a 27-store retail chain in Belgium. By 2004, GiFi had acquired full control of Idé and gained a significant presence in the Belgian discount retail market.

Company Perspectives:

In the market of the distribution of low-priced non-grocery goods, GIFI has developed an original concept of distribution, which its present strength depends on. This concept revolves around a highly competitive quality/price ratio combined with a pertinent way of distribution. Low price is one of the Group's guiding principles: to offer a wide range of diversified products to the largest number of customers possible. 74% of GIFI's products sell for less than EUR 4. By combining variety with quality, abundant supply in one place, GIFI cultivates the essence of retailing, and intends to make shopping a treat.

GiFi also had begun testing a new store format, that of the large-scale Maxi GiFi store format, featuring 2,500 square meters of selling space. Encouraged by the success of the format, the company launched a wider rollout, opening a total of ten stores by 2004. As part of that effort, the company began refurbishing and expanding a number of the stores throughout its network, and expected to open up to ten new Maxi GiFi stores by the end of 2005.

Having integrated its Belgian operations, the company turned its attention to new international markets. The company teamed up with a local partner to open a test store in Sassari, in the Sardinia region of Italy in 2004, and then opened a second store in Caligari. Neither store was an outright success, however, forcing the company to adapt its retail model to the Italian market.

Undeterred, GiFi moved into Spain at the end of 2004, opening two stores in Figueres and Terrassa. Soon after the company opened a third Spanish store, in Tarragona. The company also added to its operations in the French overseas departments, opening a store on the island of Réunion in 2004 as well.

GiFi reserved part of its energy for its domestic growth as well, opening a number of new stores through 2004. Significantly, the company made its first move to diversify its business, acquiring a 70 percent stake in the French discount brand name clothing retailer Griff Plus. That purchase, which was boosted to 100 percent by 2005, gave the company control of Griff Plus's 27-store retail network. GiFi quickly began adapting the chain, rolling out its own branded line of clothing, Able, in addition to Griff Plus's standard fare of discounted brand name labels.

By mid-2005, GiFi's total retail network had topped 270 stores and the company's revenues had reached EUR 440 million. Under the leadership of Philippe Ginestet, GiFi had grown into France's top retailer in the low-priced, nonfood segment. With the beginning of its international growth strategy, the company hoped to replicate that success on a European scale in the near future.

Principal Divisions

Distri Augny; Distri Beauvais; Distri Digne; Distri Essey Les Nancy; Distri Olivet; Distri Outreau; Distri Proville; Distri Romilly; Distri Sarreguemines; GiFi Diffusion; Gifi Mag; Gifies; Idé Belgium; Ingif.

Key Dates:

1981:
Philippe Ginestet opens the first GiFi retail store in Villeneuve-sur-Lot, specialized in factory closeouts and unsold stock; a second store opens within the first year.
1986:
With nine stores, GiFi converts to a low-priced retail concept.
1988:
A central purchasing facility is opened and direct purchasing from Asian suppliers begins.
1993:
The 50th store opens.
1996:
Ginestet sells 55 percent of the company in a leveraged buyout in order to step up growth; the company launches its own brands of toys, pet products, and household utensils.
1999:
The company tops 130 stores.
2000:
GiFi goes public, listing on the Euronext Paris exchange; Ginestet boosts his shareholding to 51 percent (later 56 percent).
2002:
The first international store openings occur in Guadeloupe and Guyana.
2003:
The company acquires 50 percent of the 27-store Idé retail network in Belgium.
2004:
The company acquires full control of Idé; the company opens its first stores in Italy and Spain; the Griff Plus brand name clothing store chain is acquired.

Principal Competitors

Hyparlo S.A.; Logidis; Union des Cooperateurs d'Alsace S.A.; Carcoop France S.A.S.; GML France; EMC 2; Euro Textiles S.A.; Les Galeries; Nobladis.

Further Reading

De Parcevaux, Aude-Claire, "La réussite de 5 entrepreneurs: Philippe Ginestet, président de GiFi," L'Entreprise, November 21, 2002.

Desrayaud, Jean, "GiFi innove sur le marché discount," Dynamique Commercial, May-June 2002.

"GiFi, acquisition de l'enseigne 'Griff Plus,' " Faire Savoir Faire, January 16, 2004.

"GiFi poursuit son expansion," Faire Savoir Faire, November 26, 2004.

"GiFi, vingt ans d'expansion continue," Faire Savoir Faire, February 5, 2002.

Herreria, Michel, "L'aventure Gifi ou Bécassine au Palais Brongniart," Le Passant Ordinaire, June/July 2000.

—M.L. Cohen



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