Carrefour's Q2 earnings show evidence of a turnaround in company's home market of France, which accounts for more than 40% of its sales; revenue in France fell 1.5%, versus a 3.3% drop in Q2, indicating that company's initiatives may be having an impact
Cindy Allen
PARIS
,
October 12, 2012
(Thomson Reuters)
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French retailer Carrefour SA
Plassat joined Carrefour in May with a brief to reverse years of underperformance in Carrefour's main European markets, where the hypermarkets in which it had heavily invested have been hit by competition from specialist stores and trends toward local and online shopping. Shares in the world's second-largest retailer after U.S. group Wal-Mart Stores Inc
"After a positive surprise in the first half and another ... in the third quarter, confidence could quietly return in the new management's ability to put things back on track," analysts at brokerage Aurel BGC said in a note. Plassat, who has a record of company restructuring and whose reputation as a cost-cutter earned him the nickname of "Le Nettoyeur" (cleaner), took over from retiring Lars Olofsson and is trying to around the company's fortunes. He said in August he would slash costs and defend key markets like France, Brazil and China, but has so far provided little detail on his turnaround plan. Carrefour's third-quarter statement showed sales up 0.2 percent on a like-for-like basis at 22.63 billion euros ($29.2 billion), above an average forecast of 22.57 billion in a Reuters poll of seven banks and brokerages, as robust demand in Latin America made up for weakness in austerity-hit Spain and Italy. Revenue in France stripping out fuel declined 1.5 percent, an improvement from a 3.3 percent drop in the second quarter and indicating initiatives such as offering cash-strapped shoppers lasting price cuts, introduced last year and strengthened by Plassat, are starting to have an impact. France accounts for more than 40 percent of group sales. ENCOURAGING SIGNS "While we are pleased with these encouraging signs, we are still hard at work in France," Chief Financial Officer Pierre-Jean Sivignon told a conference call. The group said it was comfortable with analyst estimates for 2012 earnings of between 2.07 and 2.10 billion euros, before interest and taxes (EBIT), against 2.18 billion last year. Sales at Carrefour's French hypermarkets fell 3.3 percent in the third quarter, against a 5.7 percent fall in the second quarter. Sales in the food sector improved for a third consecutive quarter. Sivignon told analysts the sales trend for non-food items such as textiles and electronics had also marginally improved but remained difficult in French hypermarkets. He said "price image", a closely watched perception shoppers have of how expensive Carrefour is compared with rivals, was also gradually improving. "It's a long-term effort but the trend is there," he said. Many retailers across Europe are struggling as consumers' disposable incomes have been squeezed by rising prices, muted wage growth and government austerity measures, as well as changing consumer habits. Last week Metro AG
Carrefour still has big operations in some of the countries worst hit by the crisis, such as Spain and Italy, having pulled out of Greece. Spain and Italy accounted for more than 16 percent of group sales in the third quarter. Quarterly like-for-like sales excluding petrol fell 5.4 percent in Spain and 6.6 percent in Italy. The trend for non-food sales in Spain was slightly better, but Sivignon cautioned that a new batch of austerity measures there could have an impact on fourth-quarter consumption. In emerging markets, China continued to struggle, while Brazil, Carrefour's second-largest market after France, had like-for-like sales growth of 9.7 percent. (Editing by James Regan and David Holmes)
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