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LONDON - Carrefour has picked the right rescue plan five years late. New boss Alexandre Bompard will invest 2.8 billion euros to fend off online competition and has pledged to cut costs. Such sweeping change will be tough, and Carrefour is far behind rivals. Bompard, dubbed the Emmanuel Macron of business, used his first six months in the job to get his arms around Carrefour’s formidable challenges. The group has a sprawling global empire of 12,000 stores in more than 30 countries, and its reliance on large hypermarkets is inefficient in an era where more and more food is being bought online. It has made two profit warnings in the last five months.
Bompard’s plan suggests he is taking the right medicine. He wants to cut costs by 2 billion euros through 2020, in part from better purchasing terms, but roughly one-in-five employees at the group’s headquarters will be offered redundancy. The group is also tidying up its struggling China business with a partnership with Tencent.
He is also getting serious about the online threat. With French competitor Leclerc’s online business now five times that of Carrefour according to Bernstein estimates, Bompard needs to ramp up investment to have any hope of reaching a targeted 5 billion euros of online food sales by 2022.
Investors will also be reassured by Bompard’s focus on Carrefour’s core food business. A new buying agreement with his former employer, electrical and household goods retailer Fnac Darty, and a recent purchase of a stake in the online private sales website Showroomprive, raised fears that he might waste money on growing non-food sales. A pledge to cut space suggests that’s not the case.
The snag is that Carrefour should have done this years ago. And competition is about to get tougher with Amazon eyeing the grocery sector. Investors are now valuing Carrefour at around 16 times forward earnings, in line with peers and nearly 10 percent above its own five-year average. That leaves little room for error.
CONTEXT NEWS
- Alexandre Bompard, the new chief executive of French supermarket Carrefour, on Jan. 23 announced plans to cut the retailer’s costs, invest in e-commerce, and a new partnership with Tencent to boost Carrefour China’s customer traffic.
- Bompard’s “Carrefour 2022” strategy will see 2 billion euros of cost taken out of the business by 2020, in part through more efficient purchasing.
- Europe's largest retailer, and the second-biggest in the world behind the U.S.’s Walmart, will also invest 2.8 billion euros by 2022 to accelerate its online offer.
- Carrefour added that a voluntary redundancy plan would be offered to 2,400 employees at its head office in France, out of a total workforce of 10,500.
- Carrefour’s shares were up 6.5 percent to 19.65 euros by 0902 GMT on Jan. 23.
(Editing by Neil Unmack and Bob Cervi)
© Reuters News 2018
Bompard’s plan suggests he is taking the right medicine. He wants to cut costs by 2 billion euros through 2020, in part from better purchasing terms, but roughly one-in-five employees at the group’s headquarters will be offered redundancy. The group is also tidying up its struggling China business with a partnership with Tencent.
He is also getting serious about the online threat. With French competitor Leclerc’s online business now five times that of Carrefour according to Bernstein estimates, Bompard needs to ramp up investment to have any hope of reaching a targeted 5 billion euros of online food sales by 2022.
Investors will also be reassured by Bompard’s focus on Carrefour’s core food business. A new buying agreement with his former employer, electrical and household goods retailer Fnac Darty, and a recent purchase of a stake in the online private sales website Showroomprive, raised fears that he might waste money on growing non-food sales. A pledge to cut space suggests that’s not the case.
The snag is that Carrefour should have done this years ago. And competition is about to get tougher with Amazon eyeing the grocery sector. Investors are now valuing Carrefour at around 16 times forward earnings, in line with peers and nearly 10 percent above its own five-year average. That leaves little room for error.
CONTEXT NEWS
- Alexandre Bompard, the new chief executive of French supermarket Carrefour, on Jan. 23 announced plans to cut the retailer’s costs, invest in e-commerce, and a new partnership with Tencent to boost Carrefour China’s customer traffic.
- Bompard’s “Carrefour 2022” strategy will see 2 billion euros of cost taken out of the business by 2020, in part through more efficient purchasing.
- Europe's largest retailer, and the second-biggest in the world behind the U.S.’s Walmart, will also invest 2.8 billion euros by 2022 to accelerate its online offer.
- Carrefour added that a voluntary redundancy plan would be offered to 2,400 employees at its head office in France, out of a total workforce of 10,500.
- Carrefour’s shares were up 6.5 percent to 19.65 euros by 0902 GMT on Jan. 23.
(Editing by Neil Unmack and Bob Cervi)
© Reuters News 2018
