* Operating profit 2.238 bln euros vs average forecast of
* Eyes 2014 capex of 2.4-2.5 bln euros vs 2.2 bln in 2013
* Carrefour may sell Carrefour Brazil shares or do IPO in
2015 - CEO
* Share price up 4 pct
By Dominique Vidalon
PARIS, March 5 Carrefour, the world's
second-largest retailer, reported a rise in profits on
Wednesday as work on turning round its core French business
started to pay off and said it might list shares in its core
Brazilian business next year.
Europe's largest retailer also said it would spend more cash
this year to revive its European hypermarkets and expand further
in both China and Brazil.
Carrefour said it would decide by the end of the year
whether it would make a trade sale of a stake in its business in
Brazil, its largest market after France, or proceed with an
initial public offer of shares in 2015.
"We want to prepare Carrefour to play a major role in Brazil
in the future ... We want to be ready to act in Brazil in 2015,"
Chief Executive Georges Plassat told investors.
"Everything is possible as long as we retain control", he
added, saying that Carrefour had no specific funding needs in
Brazil but that the presence of local investors would help it
expand in South America's largest economy.
The Brazilian business is estimated to be worth 7-9 billion
euros, analysts have said.
CONFIDENCE ON REVIVAL PLAN
Europe's largest retailer said operating profits last year
rose a slightly better than expected 5.3 percent to 2.238
billion euros ($3.1 billion) thanks to a sharp improvement in
profitability at home as well as robust growth in Latin America,
although Spain, Italy and Asia remained weak.
Plassat, who took over as chief executive 20 months ago,
told investors that with the core French market on the mend and
Spain showing signs of improvement in the second half, he was
confident he would deliver on his three-year plan to revive the
group's ailing European business.
"I feel good about the remaining year and a half (of the
plan). The company will not disappoint the market," he said.
"Within a year and half, at the end of the plan, Europe will
have regained the profitability levels it had lost," he said.
Struggling Italy may, however, not break even before 2015,
Shares in Europe's biggest retailer were 4.22 percent higher
at 27.78 euros by 1410 GMT, when the French CAC 40 index
was down 0.12 percent.
Carrefour, second only to Wal-Mart among the world's
biggest retailers, is battling to reverse years of
underperformance in Europe, where it makes 73 percent of its
sales. Its problems are partly due to a reliance on the
hypermarket format it pioneered, as time-pressed customers shop
more locally and online, and buy non-food goods from
Plassat has had some success in the group's home market of
France by cutting costs, revamping stores, improving price
competitiveness, simplifying product offerings and giving more
autonomy to store managers.
Carrefour said its operating margin in France, which
accounts for 47 percent of revenue, rose to 3.4 percent of
sales, helping to lift the group margin to 3 percent from 2.6
percent in 2012, although that still lagged the 4.9 percent
achieved by smaller French peer Casino.
A stronger France helped counter a decline in the
profitability for the rest of Europe, dragged down by Italy and
Spain, while Asia also remained weak.
Many retailers across Europe have been struggling as
shoppers' disposable income is squeezed by subdued wage growth
and austerity measures, and most have responded with price cuts.
Carrefour said it would invest between 2.4 billion and 2.5
billion euros to renovate and expand stores this year, up from
the 2.2 billion in 2013, a rate of spending which analysts had
expected would be unchanged in 2014.
In France alone Carrefour planned to spend 1 billion euros
this year, a level unchanged from 2013.
Carrefour will continue to renovate stores in France,
Brazil, Italy and Spain in 2014, while expanding its store
network in China and Brazil.
Carrrefour's decision to accelerate capital spending in 2014
contrasts with the situation at British rival Tesco,
which last month said would lower its overall capital
expenditure as it was cutting back on expanding its net new
However, Carrefour's capex to sales ratio of 2.9 percent for
2013 still lags the 3.2 percent achieved by Casino last year,
while estimates for Tesco's ratio in 2013 stand at 4.6 percent,
according to Thomson Reuters I/B/E/S Estimates.
Analysts also point out that Carrefour started its
restructuring effort earlier than Tesco.
"Tesco are two years into the turnaround and are now giving
themselves a further three year horizon to see positive
results," Bernstein analysts said in a recent note.
"This is much like Carrefour from 2005, plenty of false
dawns with declining market shares and with two margin resets
already under their belt. There were many more to come before
the first signs of stabilisation in 2013."
Carrefour shares rose 49 percent last year, welcome news for
top stakeholder Blue Capital, controlled by LVMH CEO
Bernard Arnault, and U.S. investment fund Colony Capital.
although the stock has dropped back by 7.5 percent so far this
year amid concerns the recovery in France might be losing steam
while there are new headwinds in emerging markets.