There is little doubt Carrefour, under the stewardship of CEO Georges Plassat, is an improving business.
When Plassat joined the French retail giant in 2012, the company had endured a tumultuous 18 months, which included a series of profit warnings and, after a plunge in its share price, investor dissent over its strategy.
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Fast-forward to this week and Plassat was able to report Carrefour was “on the march” after the company posted underlying operating profit that beat analyst expectations and, crucially, higher sales in France on the back of recent investment in price and stores.
“The company is not moving as fast as I would like it to sometimes but I am confident in the ability in the teams in general to be combative,” Plassat told a media and analyst conference in Paris on Wednesday (5 March).
In 2013, after a wave of investment to improve Carrefour’s prices and ranges in France, the company’s domestic sales inched up 0.3%. Like-for-like sales in France grew across all its formats, Carrefour said.
Elsewhere in Europe, analysts also noted signs of improvement in Spain, Carrefour’s third-largest market.
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By GlobalDataFurther afield, Carrefour reported a “remarkable” increase in organic sales in Brazil. Sales in China, Carrefour, said were up 3%.
The company invested EUR2.2bn in 2013 and plans to spend EUR2.4-2.5bn in 2014 to “intensify” its store remodelling programme, “accelerate” its roll-out of multi-channel operations and continue its expansion in key emerging markets Brazil and China.
Among analysts, “solid” was a common description of Carrefour’s results. However, there was some concern over the outlook for the business.
Jyske Bank analyst Robert Jakobsen said Carrefour’s management had already “picked the lowest-hanging fruit” and faced some work continuing to drive the turnaround Plassat set out 18 months ago.
Over at Sanford Bernstein, Bruno Monteyne was one of the analysts who had described Carrefour’s performance in 2013 as “solid” but was cautious about the company’s prospects.
“A sustained recovery needs to be sales led, based on a distinctive offer. A recovery can only go so far based on managing waste and realigning prices,” Monteyne wrote.
The analyst said “three good quarters in France” had built hopes for a recovery at Carrefour. “We don’t share this enthusiasm. Our view is that Carrefour remains structurally challenged, with unattractive formats in unattractive countries. It is still too dependent on hypermarkets in France and Western Europe.”
This year, Plassat has said Carrefour will continue to work on its price, range and multi-channel capabilities in France. It is, however, facing a tough set of competitors. Auchan, for example, has is reorganising the way it staffs its hypermarkets to improve customer service; there have also been reports Auchan will invest EUR200m in prices.
In Spain, competition appears to be intensifying, with market leader Mercadona opening more stores and German discounter Lidl trying to continue its inroads in the country.
“We believe that 2014 will be another tough year for the Spanish food retail industry with many different players expanding business including Dia, Lidl, Mercadona, Carrefour, ECI, Eroski among other players,” Kepler Cheuvreux retail analyst Inigo Equsquiza said this week. “We also believe that 2014 might be a tougher year than 2013 from a pricing perspective.”
Plassat remains confident about Carrefour’s prospects in Brazil and China. However, even the ebullient Frenchman admitted Carrefour’s performance in Brazil, while “good”, had “lagged” rival and market leader Grupo Pao de Acucar, controlled by French rival Casino.
And, in China, Plassat admitted Carrefour’s moves into China’s tier-two and tier-three cities have not paid off to the extent the retail giant hoped.
It is clear Carrefour has made some improvement during Plassat’s tenure but more work remains.
