Mar 5, 2015
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Carrefour lifts capital spending to cement turnaround

Mar 5, 2015

PARIS, France - Carrefour SA, the world's second-largest retailer, reported higher profits on Thursday as a revival of its European hypermarkets started to pay off and said it would lift capital spending further this year to cement that recovery.

The group also reiterated it would be ready to go ahead this year with a stock market flotation in Brazil, its second-largest market after France, if market conditions allow.

Carrefour, which ranks second globally to Wal-Mart Stores Inc, said 2014 operating profit rose 6.7 percent to 2.39 billion euros ($2.6 billion), in line with a Thomson Reuters I/B/E/S poll average of 2.38 billion.

The performance reflected improved profitability at its core French and European businesses and robust growth in Brazil. Asia remained weak, however, amid slowing consumption and a government crackdown on lavish spending in China.

"Our turnaround plan and good cost control are bearing fruit," said Chief Financial Officer Pierre-Jean Sivignon.

For 2015, the final year of its three-year revival plan, the retailer will also focus on further increasing free cash flow and retaining strict financial discipline, he said.

Carrefour shares were 0.9 percent higher at 29.94 euros by 0805 GMT. Citi analysts said in a note that overall the numbers looked strong and would be taken positively by the market.

Carrefour, which makes 73 percent of its sales in Europe, has suffered from a reliance on the hypermarket format it pioneered as customers shift to more local and online shopping, trends that have caused headaches for British retailers, in particular market leader Tesco Plc.

In response, Carrefour chief Georges Plassat has cut costs and prices, refreshed stores and given greater autonomy to managers, beginning in France.

Carrefour said it would invest between 2.5 billion and 2.6 billion euros in 2015 on renovating and expanding stores, including those of recently acquired discounter Dia in France.

This compares with 2.4 billion spent last year on renovating stores in France and Brazil and improving IT and logistics.

Carrefour said its operating margin in France, which accounts for 47 percent of revenue, rose by 20 basis points to 3.6 percent of sales, helping lift the group margin to 3.2 percent from 3.0 percent in 2013, although that still lagged the 4.6 percent of smaller peer Casino.

Plassat, main architect of Carrefour's revival, will not attend the earnings news conference. Carrefour said he was expected to return to work before the end of April after recovery from surgery.

€1 = $1.11/£0.73

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