Carrefour‘s 2013 results came in above market expectations, with analysts praising the French retail giant’s work in recent years, particularly in its domestic market. Signs of an improvement in Spain were also welcomed. However, there is concern Carrefour’s management, part-way through a turnaround of the business, has some tough tasks ahead.
Sanford Bernstein analyst Bruno Monteyne
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“The results were solid, beating consensus expectations of recurring operating income. Growth in margin was been driven by France, whereas the international divisions saw continued shrinking of margins.
“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. Overall, we question how long Carrefour can continue to be called a growth stock, with the pace of the France recovery slowing; it appears that the low hanging fruit of reducing wastage and correcting prices has already been picked. Carrefour needs to find a distinct retail offer than can see it regain market share for it to exhibit a sustained recovery.
“Carrefour’s stock has performed well over the last 12 months as hopes for recovery build on the back of three good quarters in France. 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.”
Mike Dennis, managing director, food retail, food producers and beverages at Cantor Fitzgerald
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By GlobalData“A number of priorities were outlined for 2014: one, improve offer and price, with a focus on France, Brazil and Spain three of their largest markets; two, develop multi-channel retail with more click and collect; three, renew the supply chain in France, which we view as a major step forward in becoming more efficient and attractive to suppliers; four, invest EUR2.45bn in refurbishments; and five, expand in China and Brazil.
“We reiterate our buy recommendation and target price of EUR32.50 based on 12.5x FY14 EV/EBIT. These results show that the negative forex impacts have been more than offset by the upside from higher trading margins in France in 2014/15 and that the new priorities in France, Spain and Brazil should help improve profits in 2014.”
Natixis analyst Antoine Parison
“2013 results were solid with growth in underlying operating income of 5.3% and we confirm our buy rating (target EUR31). Underlying operating income in France was solid, which implies a sharp improvement in the adjusted operating margin. Underlying operating income in other western European countries was down significantly but showed a sharp improvement in H2 thanks to Spain. The performances in Latin America were also very good with underlying operating income up 19% at constant exchange rates. As expected performances in China had been disappointing in Q4 13 with LFL growth of -3.5%. Underlying operating income in Asia was down 27% over the year and by 45% in H2 13.
“We continue to believe that the share should be buoyed in 2014 by positive momentum in France where the group should continue to gain market share in 2014.”
