July 17, 2014 / 5:46 AM / 4 years ago

Carrefour has best quarter in five years as Italy rebounds

PARIS (Reuters) - Carrefour (CARR.PA), the world’s second-biggest retailer, posted its best three-month sales in five years thanks to signs of recovery in austerity-hit southern Europe, where even Italy returned to growth thanks to World Cup promotions.

Europe’s largest retailer said all the continent was now growing. Sales rose in Spain for the third consecutive quarter, while revenue at French hypermarkets grew for a fifth quarter.

Carrefour 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, now that customers favor more local and online shopping.

In response, Chief Executive Georges Plassat has lowered costs, revamped stores, cut prices, simplified product offerings and given more autonomy to store managers, starting in France.

“The second-quarter sales breakdown shows resilient trends in France and a positive surprise in Italy. We see nothing to move the dial on our investment case: well on track for a medium-term recovery,” Societe Generale said in a note. The bank has a “hold” rating on Carrefour.

Growth in Brazil, Carrefour’s largest market after France, also accelerated, though conditions remained weak in China where a government crackdown on lavish spending hit alcohol sales.

Chief Financial Officer Pierre-Jean Sivignon said analysts’ consensus forecast for an operating profit of about 2.38 billion euros this year was “reasonable”. That would be a 6.3 percent rise on 2013.

The first-half usually accounts for about 35 percent of full-year operating income, Sivignon said.

The world’s largest retailer after Wal-Mart (WMT.N) said second-quarter sales were 20.517 billion euros ($27.8 billion), beating an average forecast of 20.384 billion in a Reuters poll of analysts. Stripping out fuel and currencies, revenue grew 4.9 percent versus 3.7 percent growth in the first quarter.

“I believe this is partly due to self-help measures implemented by Mr Plassat and his team, allied with a positive economic outlook across a number of markets, especially Spain,” said Gildas Aitamer, analyst at research firm PlanetRetail.

By 1103 GMT, Carrefour shares were down 0.38 percent, outperforming a 0.77 percent decline in the European STOXX 600 Retail Index .SXRP.

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


Sales rose 0.1 percent in Spain while Italy achieved like-for-like sales growth of 2.9 percent, thanks to promotions tied to the soccer team’s performance at the World Cup.

Sivignon was quick to point out that the economic climate in Italy remained challenging and that Carrefour also benefited from favorable comparisons with the second quarter of 2013 when Italian sales fell 9.3 percent year-on-year.

“The second quarter is of an exceptional nature on the back of the World Cup promotions,” Sivignon said, saying it should not be extrapolated to the second half.

    Actions taken in Italy such as store remodeling and a new commercial policy would show results “over the medium-term”.

    In France, sales grew in all store formats, with same-store sales at hypermarkets up 0.4 percent after a 0.7 percent increase in the first quarter.

    The group said French hypermarket food sales continued to grow, while non-food sales were nearly flat.

    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.

    Smaller French peer Casino (CASP.PA) on Tuesday posted an improvement in its hypermarket sales helped by price cuts.

    Like-for-like sales growth in Brazil, Carrefour’s second-largest market after France, was 7.2 percent, an acceleration from 6.4 percent in the first quarter. Hypermarkets and the Atacadao wholesale stores did well.

    The plan for 2014 was to open 10 Atacadao stores, having opened two in the second quarter. Carrefour will also be testing new store formats in coming months in Brazil, Sivignon said.

    Sales at Chinese stores open more than a year fell 2.4 percent after declining 3.1 percent in the first quarter.

    ($1 = 0.7395 Euros)

    Editing by David Clarke

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