PHOTO
LONDON - Carrefour is in poor shape even before a kitchen sinking. Europe’s biggest retailer cut its profit forecast for the second time in five months on weaker sales, days before new Chief Executive Alexandre Bompard is due to unveil his turnaround plans. With a need to ramp up online investment and cut back on hypermarket stores, notably in France, greater pain is still to come. The 14 billion-euro French supermarket chain, with retailing activities that stretch from Paris to Rio de Janeiro to Shenzhen, said late Wednesday that 2017 operating profit will be down 15 percent from the previous year. A slowdown in food sales and fiercer competition in its home market meant Carrefour undershot profit guidance that had already been reduced in August.
That ups the stakes for 45-year-old Bompard, whose youth has led him to be dubbed the Emmanuel Macron of business. At his strategy debut next Tuesday, investors can probably expect a new cost-cutting drive, closures of struggling hypermarket stores in France and an update on whether he will take Carrefour out of overseas markets such as China, which are proving difficult to crack.
Just as crucial is the group’s digital strategy. Bompard’s previous track record as boss of Fnac Darty suggests he has a knack for selling electrical appliances and other household goods online. Yet food is tougher to sell profitably online. And Carrefour is late to the game. French rival Leclerc already dwarfs its online grocery sales by a factor of five-to-one, according to Bernstein analysts, so catching up will require heavy investment.
Shareholders are paying 15 times forward earnings for Carrefour’s stock - not far off the 16.5 times multiple British counterpart Tesco commands around three years into its moderately successful turnaround. Coupled with Carrefour’s heavy investment needs, the full valuation suggests more pain is ahead for investors.
CONTEXT NEWS
- French supermarket Carrefour said on Jan. 17 that recurring operating income for 2017 will be lower than previously guided, down 15 percent at current exchange rates to 2 billion euros. In August, the company had said recurring operating income for the year would decline by approximately 12 percent.
- Like-for-like sales increased by 1.6 percent in 2017, down from the 3 percent growth recorded in 2016. Like-for-like sales in the fourth quarter increased by 1.9 percent.
(Editing by Tom Buerkle and Martin Langfield)
© Reuters News 2018
That ups the stakes for 45-year-old Bompard, whose youth has led him to be dubbed the Emmanuel Macron of business. At his strategy debut next Tuesday, investors can probably expect a new cost-cutting drive, closures of struggling hypermarket stores in France and an update on whether he will take Carrefour out of overseas markets such as China, which are proving difficult to crack.
Just as crucial is the group’s digital strategy. Bompard’s previous track record as boss of Fnac Darty suggests he has a knack for selling electrical appliances and other household goods online. Yet food is tougher to sell profitably online. And Carrefour is late to the game. French rival Leclerc already dwarfs its online grocery sales by a factor of five-to-one, according to Bernstein analysts, so catching up will require heavy investment.
Shareholders are paying 15 times forward earnings for Carrefour’s stock - not far off the 16.5 times multiple British counterpart Tesco commands around three years into its moderately successful turnaround. Coupled with Carrefour’s heavy investment needs, the full valuation suggests more pain is ahead for investors.
CONTEXT NEWS
- French supermarket Carrefour said on Jan. 17 that recurring operating income for 2017 will be lower than previously guided, down 15 percent at current exchange rates to 2 billion euros. In August, the company had said recurring operating income for the year would decline by approximately 12 percent.
- Like-for-like sales increased by 1.6 percent in 2017, down from the 3 percent growth recorded in 2016. Like-for-like sales in the fourth quarter increased by 1.9 percent.
(Editing by Tom Buerkle and Martin Langfield)
© Reuters News 2018
