Carrefour hit by sharp drop in operating income
Performance in France and Argentina shows scale of challenge facing new chief
Carrefour showed the extent of the challenges facing its new chief executive as it missed analyst expectations and reported a sharp drop in recurring operating income in the first half of 2017, dragged down by performance in its home French market and Argentina.
The world’s second-largest retailer by revenues said on Wednesday after market close that recurring operating income dropped 12.1 per cent year-on-year to €621m at current exchange rates in the first six months of 2017. That underperformed Bloomberg’s analyst consensus for recurring operating income of €674.6m.
The group attributed the fall to a strong competitive and promotional environment in France, where Carrefour has been forced to cut prices in its supermarkets and hypermarkets to compete with rivals such as Leclerc. There was also an increase of losses versus the first six months of the previous year at the stores Carrefour acquired from Spanish discounter Dia in 2014.
The results are the first since Alexandre Bompard replaced Georges Plassat as chief executive of Carrefour in July. He joined from rival French retailer Fnac Darty.
Mr Bompard, who has yet to unveil his strategy for the group, said on a call with analysts: “Carrefour faces a number of challenges which are well identified. Carrefour needs to accelerate digital transformation of the group. We also need to inject new life into our hypermarkets, notably in France; we also have to raise our profitability and our cash-flow generation, simplify the organisation and meet market expectations.”
There have been two large Carrefour transactions since the first half ended. In July its Brazilian subsidiary, Atacadão, raised roughly $1.6bn in an initial public offering, the biggest in Brazil in recent years. The same month Carrefour’s property unit, Carmila, announced a €629m capital increase to fund its future expansion.
On a like-for-like basis, sales increased 2.1 per cent in the first half of the year to €43.1bn, compared with the previous year.
Carrefour cut its sales guidance for the full year 2017 to between 2 per cent and 4 per cent. The retailer said that full-year results “will be impacted by our first-half performance and an operating environment that will remain difficult in the second half in some countries”. It had previously expected sales growth of 3 per cent to 5 per cent for the full year.
“Profitability may suffer further as restructuring takes place,” wrote analysts at Kepler Cheuvreux this month. “The main question is whether Carrefour can be restructured or if it is a lost cause.”
Carrefour also announced on Wednesday that Laurent Vallée had been appointed general secretary, replacing Jérôme Bédier, who has held the role for the past five years. Most recently, Mr Vallée was general secretary of France’s constitutional court.