Mar 1, 2018
France's Carrefour presents cautious outlook and dividend cut
Mar 1, 2018
Carrefour, the world’s second-largest retailer, expects currency exchange rates along with restructuring and one-off charges to weigh on profitability this year, it said after posting lower operating profit for a second year running.
Finance chief Matthieu Malige’s warning came despite new strategy unveiled last month with the aim of boosting profit and revenue in the face of the growing threat from the likes of Amazon.
“The 2017 results we are presenting today demonstrate the necessity of implementing without delay Carrefour’s transformation plan,” said Chief Executive Alexandre Bompard.
Europe’s largest retailer also announced a 34 percent cut to its annual dividend after the drop in operating profit, blaming poor performance in its core French market.
Carrefour reported a net loss of 531 million euros ($648 million) after non-recurring charges of 1.3 billion euros tied to impairments in Italy and assets linked to the former DIA stores it bought in 2014.
Bompard, who took over as CEO in July, wants to overhaul Carrefour’s French hypermarket business and expand its online operations, promising to invest 2.8 billion euros in digital commerce by 2022.
Amazon’s purchase of Whole Foods in the United States last year has prompted speculation that the technology company could be targeting food retail in Europe next.
Under pressure to increase profits, Bompard announced in January planned cost savings of 2 billion euros by 2020, including a voluntary redundancy plan for 2,400 employees at head office and the sale or closure of 273 underperforming stores bought from Spanish retailer Dia in 2014.
Bompard said on Wednesday that he was confident the job cuts would be implemented and the Dia stores dropped from the group’s scope by the end of the year. This would lead to non-recurring charges in the first half of 2018, Malige said.
The group, which has struggled for years to become less reliant on hypermarkets in France, will also reduce scale at its French megastores and revamp its food ranges as customers demand healthier products.
The group’s like-for-like sales growth slowed to 1.6 percent in 2017 from 3 percent in 2016. The drop reflects strong competition in France, where privately held Leclerc has overtaken Carrefour as the largest food retailer by market share, and higher distribution costs in Carrefour’s main markets.
Carrefour said its operating margin in France, where it makes 47 percent of its sales, fell 94 basis points to 1.9 percent, contributing to a drop in the group’s margin to 2.5 percent from 3.1 percent.
The group’s Chinese operations remained loss-making amid fierce competition from local players and a buoyant online market but said performance was improving.
Carrefour has announced a potential deal with Tencent and local retailer Yonghui to take a stake in Carrefour China. “We are in the process of finalising discussions with partners. Things are progressing smoothly,” Malige said.
Carrefour shares have gained 4.6 percent this year, outperforming their European sector, after losing 21 percent last year.
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