Mar 10, 2016
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Carrefour to spend on European revival while China lags

Mar 10, 2016

Carrefour, the world's second-largest retailer, vowed to renovate and open more stores to keep its European turnaround on track, while warning it would take time to revive its loss-making Chinese business.

The French firm disappointed investors with a lower-than-expected dividend hike and its shares fell on Thursday, despite it recording a fourth straight year of revenue and earnings growth and increased free cash flow last year.

Carrefour proposed raising its 2015 dividend by 2.9 percent to 0.70 euros a share after operating profit rose 2.4 percent to 2.45 billion euros (£1.9 billion), in line with a Thomson Reuters poll forecast.

Europe's biggest retailer and the world's second-largest after Wal-Mart, also said it was waiting for the right time to float property unit Carmila, which several analysts estimate is worth at least 4 billion euros.

By 1312 GMT Carrefour shares were off 3.10 percent at 24.55 euros, the sole decliner on the CAC-40 index of French blue chips.

"Mixed performances," was the verdict from Bryan Garnier analysts who noted the dividend lagged an expected 0.82 euros. "China is beginning to lose money, while the equity story misses catalysts somewhat."

Carrefour said it would invest between 2.5 billion euros and 2.6 billion euros in 2016 on renovating and expanding stores, notably convenience stores, up from 2.4 billion last year.

"This is not the time to sacrifice investments," Finance Chief Pierre-Jean Sivignon said.

Carrefour has suffered from its reliance on hypermarkets, which it pioneered, as customers shift to local and online shopping.

In response the company, which makes about three-quarters of its sales in Europe, has cut prices and costs, accelerated expansion into convenience stores, refreshed stores and given greater autonomy to managers, beginning in France.

Operating profit rose 33.4 percent in Europe, excluding France, driven by recovery in Spain and Italy.

Latin America was boosted by a strong sales performance in Argentina and in Brazil, its No.2 market, accounting for about 14 percent of sales, where Carrefour, unlike French rival Casino, is proving resilient to an economic downturn.

This countered an operating profit decline of 6.4 percent in its biggest market France, which reflected the integration of recently acquired Dia discount stores and a rise in taxes on larger commercial spaces. Excluding these factors, profit rose 1.8 percent in France.

China, which makes 5 percent of sales, had an undisclosed operating loss this year as slowing consumption hurt sales.

Carrefour is pursuing a plan there to expand in e-commerce and convenience stores and open logistics centres to cut costs and Chief Executive Georges Plassat said he expected these actions to have an impact on China by end of 2016-early 2017.

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