Carrefour’s plan to spin off its Dia discount arm will leave the retailer a “more focused and dynamic” company poised to drive faster profitable growth, chief executive Lars Olofsson insisted today (3 March).
The French retail giant set out proposals to spin off 100% of its Dia discount business together with 25% of its Carrefour Property unit earlier this week. However, the plan has met with a lukewarm response, with some analysts suggesting that it will fail to create “significant value” for investors.
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“Clearly these transactions ‘create value’ to the extent that investors are willing to put higher multiples on the profits of the newly listed business, without a correspondingly lower multiple on the remaining business,” analysts at Bernstein Research wrote in a note to investors. “Beyond the potential ‘multiples arbitrage’ it is difficult to see how these transactions create value.”
Addressing these concerns during a conference call following the release of Carrefour’s full-year results, Olofsson said that the spin off of the discounter would allow Carrefour to concentrate on the turnaround of its core business.
“Dia has a destiny by itself. We need to concentrate on Carrefour,” Olofsson said. “Following the spin-off of Dia we will be more focused to capitalise on the potential of our brand and banners. We will be more focused on our core operational performance and even more focused on the execution of our transformation plan. But we will also be more dynamic because we will be more focused on leveraging our Carrefour brand.”
Carrefour management revealed that it expects three growth levers to drive sales and profit expansion. Olofsson said that the company would concentrate its energies on expanding in emerging markets, rolling out its Carrefour Planet hypermarket concept in Europe and also on developing the group’s own label assortment.
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By GlobalDataIn emerging markets, Olofsson said that Latin America remained a “good growth lever” despite a “disappointing” performance over the past 12 months – particularly in Brazil. Meanwhile, in China he confirmed that the group was closing some stores but insisted that Carrefour would continue to build on its “solid business model”.
“China is clearly, clearly a growth market for us where we will continue expansion and accelerate it… In Indonesia we [also] have a new partnership where we want to accelerate,” he revealed.
Olofsson said that the company was planning 800 store openings over the coming year and insisted that – when last year’s Dia openings were stripped out – the group was increasing the pace of store openings in emerging markets.
Meanwhile, management suggested that the roll out of 500 Carrefour Planet hypermarkets by 2013 would revitalise its flagging hypermarket business in Europe.
Through its Carrefour Planet strategy, Olofsson said that the group had experienced some success in its “absolute objective” to “increase traffic”.
Carrefour has seen footfall at its Planet hypermarkets increase, he said, although the average basket spend per customer had fallen. To address this, Olofsson said that Carrefour planned to use its third growth lever – its own-label products – to “excite” consumers.
“Planet is a growth lever. You can see that the sales are up, the traffic is there and we are going to fuel it with our brands to excite,” he said.
