Bloomberg News

Arnault, Colony Said Weighing Replacing Carrefour CEO Olofsson

November 30, 2011

Nov. 20 (Bloomberg) -- Carrefour SA’s largest shareholders are considering replacing its chairman and chief executive officer, Lars Olofsson, people familiar with the matter said.

Groupe Arnault SAS and Colony Capital LLC, which hold a combined 16.15 percent of Carrefour and 22.14 percent of the voting rights, will give Olofsson until the end of the year to improve the Boulogne-Billancourt, France-based grocer’s performance in its domestic and largest market, said the people, who asked not to be named as the discussions are private.

Carrefour has lost about a third of its market value amid an extended slump in France, where it is adjusting prices and overhauling its largest stores. In October, the retailer lowered its 2011 profit forecast for the second time in three months, citing challenging economic conditions, particularly in southern Europe. Olofsson’s turnaround plan has failed to win over enough consumers and doesn’t address demand for convenience and proximity, analysts have said.

The Swedish chief executive, who turns 60 next month, could leave as soon as Dec. 31, when he qualifies for extra retirement benefits after three years at the company, two of the people said. Carrefour reports fourth-quarter sales on Jan. 12. The stock has fallen 23 percent since Olofsson became CEO and is down 32 percent this year.

The departure of Olofsson, who took the role of chairman in June, would increase the number of senior executive changes at Carrefour this year to six. Pierre-Jean Sivignon became chief financial officer in September, replacing Pierre Bouchut, who was named executive director growth markets.

Stock Slump

Florence Baranes-Cohen, a spokeswoman for Carrefour, declined to comment, as did a spokesman for Arnault and Colony. The investors support management’s strategy, the Autorite des Marches Financiers, France’s market regulator, said this month.

Olofsson joined Carrefour in January 2009, as the grocer was coming off a decade of meager sales growth in France. In September 2010, he introduced a 1.5 billion-euro ($2 billion) plan to remodel Carrefour’s largest stores in western Europe, betting a new format with lower prices and more own-label products will boost sales and profit through 2015.

Since then, Carrefour has predicted lower profit five times as the retailer tried to do “too much, too quickly,” Olofsson has said. In a revision to his plan, the grocer will step up smaller store expansion, focus on selective price investment and increase the number of own-branded items, Olofsson said Aug. 31. Carrefour will also cut capital expenditure in Greece and Italy.

Spanish Spinoff

While Olofsson spun off all of the discounter Distribuidora Internacional de Alimentacion SA on the Madrid stock exchange in July, he shelved a plan to list 25 percent of Carrefour’s property assets in Europe following opposition from investors, unions and squabbling among management. The CEO also presided over an aborted proposal to merge Carrefour’s Brazilian unit, whose value was written down by 550 million euros in 2010, with Cia. Brasilieira de Distribuicao Grupo Pao de Acucar.

Last month, Knight Vinke Asset Management LLC, which owns about 1.5 percent of Carrefour, called for the French grocer to split Olofsson’s role of chairman and CEO and appoint an independent chairman, citing “serious governance issues.” In the open letter to Carrefour’s shareholders, employees and board, Knight Vinke also recommended the board not bring in an outsider, saying Carrefour has qualified candidates in its ranks.

Carrefour’s European labor committee rejected the proposal, saying it was aimed at dismantling the retailer.

--Editors: Chris V. Nicholson, Jacqueline Simmons

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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