April 10, 2014 / 11:31 AM / 4 years ago

UPDATE 3-Carrefour's sales growth gets a boost from Brazil

* French Q1 like-for-like hypermarket sales growth slows vs Q4

* Brazil accelerates, Spain grows for second quarter in a row

* Consensus 2014 EBIT of 2.38 bln euros is “reasonable”-CFO (Adds further details, updates share price)

By Dominique Vidalon

PARIS, April 10 (Reuters) - Carrefour, the world’s second biggest retailer, said sales growth quickened in the first quarter, driven by Brazil, its second largest market after France and which Chief Executive Georges Plassat has earmarked for further expansion.

Sales in austerity-hit Spain rose for the second consecutive quarter while growth at Carrefour’s troubled French hypermarkets business slowed amid a price war among retailers.

China, another key emerging market where Carrefour wants to expand further, also stayed weak in the last three months, but overall the company said the group was still on course to meet expectations for a rise in profits this year.

Chief Financial Officer Pierre-Jean Sivignon said the consensus of analysts’ forecasts for an operating profit of around 2.38 billion euros this year was “reasonable at this stage”. This would be a 6.3 percent rise on the 2013 result.

“We see this quarter as the conclusion of a cycle. The final pieces of the management reshuffle initiated over previous quarters are falling into place in Europe and Brazil,” said PlanetRetail analyst Gildas Aitamer.

Carrefour is battling to reverse years of underperformance in Europe, where it earns 73 percent of its sales, with problems partly due to a reliance on the hypermarket format it once pioneered now that customers’ habits have changed to favour more local and online shopping.

Chief Executive Georges Plassat has responded with cutting costs, revamping stores, improving price competitiveness, simplifying product offerings and giving more autonomy to store managers, starting with France which serves as a template for the rest of the group and notably Europe.

Carrefour’s progress contrasts with the difficulties encountered by British rival Tesco, whose own turnaround plan at home has so far failed to revive its fortunes in the face of stiff competition..

Carrefour, the world’s largest retailer after Wal-Mart , said on Thursday its first-quarter sales amounted to 19.79 billion euros, close to the average of analysts’ forecasts of 19.83 billion, according to Thomson Reuters I/B/E/S Estimates.

Quarterly sales were dented by a later Easter holiday, which is in April this year instead of March, and lower vehicle fuel prices. Excluding these factors, like-for-like sales growth was 3.7 percent in the quarter, an acceleration from 3.2 percent growth in the fourth quarter 2013.

This was Carrefour’s “best underlying quarterly sales growth performance in over two years”, Sivignon said.

Carrefour’s shares were down 0.07 percent at 29 euros by 1405 GMT, when the Stoxx Europe 600 retail sector index was down 0.19 percent.

“Overall there were no surprises today and the data points to resilience in trading in Carrefour’s key markets” said Citi analysts in a note.

Citi kept a “neutral” rating and a target price of 27 euros per share as future upside to these recommendations hinged notably on improving trading in France. The shares are up 32 percent on a year ago, compared with a 7 percent rise in the European sector index.


In France, which accounts for almost half of group revenues, sales rose 1.4 percent in the quarter with increases in all store formats.Convenience stores sales grew 5.7 percent.

Same-store sales at Carrefour’s hypermarkets, however, rose 0.7 percent, a slowdown from a 1.4 percent rise in the fourth quarter of 2013, as price competition among retailers increased.

The group, which started cutting prices in France two years ago, saw an increase in hypermarket traffic for a fourth consecutive quarter while hypermarket food sales grew for the sixth consecutive quarter, Sivignon said.

French inflation eased slightly more than expected last month to reach the lowest level since October, official figures showed on Thursday, adding to signs of dissipating price pressures in the euro zone.

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.


In Spain, Carrefour’s third-largest market, like-for-like sales rose 0.6 percent after 0.2 percent growth in the previous three months, in what was the country’s first growth in five years.

Sivignon said this was because Carrefour had invested heavily in improving its fresh food offering, allowed managers to adapt to local needs, and revamped stores.

In Italy, where price competition was fierce, Carrefour had started remodelling some stores and was training staff to beef up their expertise on fresh produce but sales were still down 5.6 percent in the quarter after falling 5.8 percent in the fourth quarter of 2013.

Like-for-like sales growth in Brazil, Carrefour’s second-largest market after France, accelerated to 6.4 percent from 5.6 percent growth in the fourth quarter.

For 2014 the plan is to open 10 Atacadão cash and carry stores. Carrefour has said it would decide by the end of the year whether it would sell a stake in its business in Brazil, or proceed with an initial public offer of shares in 2015.

Meanwhile sales at Chinese stores open over a year fell 3.1 percent in the first quarter, a decline similar to that of the fourth quarter. Carrefour has been affected by lower consumption in discretionary categories, especially non-food and alcohol sales amid a government crackdown on lavish spending. (Editing by Leila Abboud and Greg Mahlich)

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