(Reuters) - Carrefour's (CARR.PA) plan to open a premium food store on La Madeleine square in the heart of Paris has raised eyebrows at a time when Europe's largest retailer has vowed to cut prices to revive ailing French operations.
The French retailer would be tapping into a niche market that has largely escaped a squeeze on consumer spending due to its focus on affluent shoppers and is attracting retailers around the world from Dairy Farm in Asia, El Corte Ingles in Spain to Auchan in France.
But the plan puzzles those who believe the French company, best known for pioneering vast "hypermarkets" and which is losing market share at home, already has a lot on its plate.
"Carrefour is a strategic mess at the moment and their direction seems to be changing by the day," said Natalie Berg, an analyst with research firm PlanetRetail. "They should be purely focused on fixing those self-inflicted problems such as price perception and availability in their core hypermarkets rather than diversifying into risky, new business areas."
Last month, Carrefour has said 2011 profit would slump 15 percent as it cuts prices in a bid to reverse falling market share and tackle an increasingly tough economic environment.
According to the latest data from market research provider Kantar Worldpanel, Carrefour has lost additional market share in France despite promotions during the crucial back-to-school season running from August 8 through September 4.
A company spokeswoman recently told Reuters that the future 3,500 square meter store, which will be located next to the famed Hediard and Fauchon luxury food stores, would probably be named "Les Halles de la Madeleine" and would offer fresh products, organic and gourmet food as well as wine.
No opening date has yet been set for what Carrefour said will be a one-off store.
Laurent Thoumine, Managing Partner at management consultancy Kurt Salmon, said that Carrefour was seizing an opportunity to get access to a prime Paris area, which generates a heavy traffic of affluent shoppers.
"Carrefour is a multi-format, multi-products group. This can work if the store is given enough autonomy and it will hardly disrupt the rest of the group," he said, estimating Carrefour's capital expenditure on the store at below 100 million euros.
Premium supermarkets run by large retailers have worked better in countries, such as France and Belgium, that have a strong gastronomic culture, analysts say.
Carrefour already owns a premium food store in Brussels called Rob and domestic rival Auchan will be launching its Auchan Gourmand store in the port city of Marseilles.
(Reporting By Dominique Vidalon; Additional reporting by Pascale Denis in Paris; Editing by Jon Loades-Carter)