Jul 13, 2011
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Carrefour broadens action plan after H1 profit dive

Jul 13, 2011

July 13 - Carrefour , the world's No.2 retailer, flagged a 23 percent drop in first-half earnings and said it was broadening an action plan, initially focused on France, with the aim of meeting its goal to grow profits this year.

The French group, hit overnight by the collapse of a merger plan in Brazil, said on Wednesday it made a first-half operating profit of around 760 million euros ($1 billion) as lagging performance in France and weak western European markets outweighed strong sales in Asia and Latin America.

"Carrefour is devising and implementing an action plan with the objective of attaining the group's 2011 target of a progression in sales and current operating income," Chief Executive Lars Olofsson said.

"In addition to France, all of our teams are now being mobilised to support this goal."

Carrefour, which only lags U.S. retailer Wal-Mart globally by annual sales, said last month it was drawing up a recovery plan for France as it warned first-half earnings there would dive 35 percent.

It admitted to a tactical mistake in raising prices before rivals.

"There wasn't much of a consensus about the first-half earnings number, but I think the market will look upon that a little disappointedly," said RBS analyst Justin Scarborough.

Carrefour, with more than 9,500 stores in 32 countries, is part way through a turnaround programme aimed at slashing costs, boosting competitiveness and revamping its core hypermarket business after years of underperformance.

The plan has shown few lasting signs of improvement, though, with the group issuing three profit warnings in less than a year.

Late on Tuesday, the group was also dealt a blow when tycoon Abilio Diniz abandoned a plan to merge Brazilian retailer Grupo Pao de Acucar (GPA) with Carrefour's local assets following opposition from the government and his partner in GPA, French retailer Casino .

Carrefour, Casino and Wal-Mart are jostling for position in the fast-growing Brazilian market to offset sluggish growth in their home territories, where shoppers are suffering from rising prices, stagnating wages and austerity measures.

Carrefour said second-quarter sales rose 1.6 percent to 22.4 billion euros, broadly in line with expectations.

Sales at French hypermarkets open at least a year dropped 3.3 percent, excluding petrol and calendar effects.

Carrefour shares have underperformed the STOXX Europe 600 retail index by 23 percent this year. They closed at 21.99 euros on Tuesday, valuing the business at about 15 billion euros, after touching a two-year low of 21.545 euros.

(Reporting by Mark Potter; Editing by Dan Lalor)

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