Carrefour CEO Georges Plassat has insisted the world’s second-largest retailer has to invest to build on the signs of improvement at the company and withstand competition.
Plassat said the French retail giant, which yesterday (7 March) reported core annual profits that beat analyst expectations, would remodel stores in France, Brazil and China and also carry out a “structured expansion programme”.
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Carrefour plans to increase its capital expenditure this year after a period of “limited” spending, Plassat said.
“The fact we have had limited capex over the last two years was sensible given the state of the balance sheet but we have to boost our capex now on remodelling or we’ll pay very dearly for it four or five years down the line,” Plassat told reporters after Carrefour posted its annual results.
“There’s a programme for remodelling in France this year and Brazil, too. In China, in some of the larger towns and cities, we have to do something or we will be outdated compared to the competition. We’re not talking about spending money, we are talking about investing. If you don’t invest when you are a retailer, you are doomed. Does investing mean taking risk? Yes – but not investing is an even greater risk.”
Carrefour plans to spend EUR2.2bn (US$2.85bn) to EUR2.3bn on capital expenditure in 2013, up around 50% on 2012. Plassat said half the money would be spent on remodelling stores and half on expansion.
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By GlobalDataThe retailer plans to continue its moves to revitalise its French business, which accounts for around 40% of the company’s operating income and which reported higher profits in 2012 despite investment in price.
Plassat said Carrefour’s moves to improve the perception of its prices among French consumers was improving and insisted the retailer would continue to work on its image.
“The major thing is we should improve our price competitiveness. There is no alternative to that,” Plassat said. “Carrefour is classified by everybody as number two in terms of price. In terms of image we are still number three. Carrefour is very well positioned in terms of price. This is undeniable. Our low-price policy will continue.”
Carrefour’s improved performance in France helped boost its shares yesterday, with the shares up 6% at one stage. Analysts welcomed the results from France; Kepler Capital Markets analyst Fabienne Caron said the data from Carrefour’s domestic business “bodes well for 2013”.
Speaking to reporters, Plassat insisted Carrefour’s improvement in France could continue. “The French margin level is sustainable without compromising our competitiveness. We still have a lot to do on buying processes, assortment and distribution,” he said.
Nevertheless, Plassat said Carrefour must now push on and further implement plans to revitalise its business in France and further afield. The Carrefour chief said “decentralisation” was a key way the retailer could improve as that would enhance the company’s relationship with consumers.
“Wherever we operate, we have to deal with local competitors who have a closer relationship with customers, are much more decentralised and have a greater local empathy than we do. We have to put the customer at the heart of the business and that requires sensible decentralisation,” he explained.
“Decentralisation is something we have to go along with and we have to roll it out sensibly over time. We are going to have a bottom-up evolution here. It may seem superficial but it’s basic, vital and is a cultural issue, a behavioural issue.”
The retailer also plans to shake up its logistics, product management and IT. “What’s important is moving from thinking to acting,” Plassat added.
