Carrefour Sees Profit at Low End of Reduced Forecast Range
January 20, 2012, 2:18 AM ESTBy Andrew Roberts
(Updates with closing share price in fifth paragraph.)
Jan. 19 (Bloomberg) -- Carrefour SA, the world’s second- largest retailer, said 2011 profit was at the lower end of its reduced forecast range after fourth-quarter sales declined.
Full-year current operating income fell closer to 20 percent than 15 percent, Boulogne-Billancourt, France-based Carrefour said today in a statement. Quarterly revenue fell 1 percent to 24.2 billion euros ($31.3 billion), compared with the 24.4 billion-euro average estimate of five analysts.
Sales were affected by lower discretionary spending, particularly in Spain, Italy and Greece, Chief Financial Officer Pierre-Jean Sivignon said today on a call with analysts. Sales also slid in France, Carrefour’s largest market, where it’s cutting prices and overhauling its biggest stores, as well as in Asia, leaving Latin America as the retailer’s sole bright spot in the quarter.
“The Carrefour business model is inherently flawed given its overdependence on a dated format and slow-growth markets,” said Natalie Berg, global research director at Planet Retail in London. “Rather than directing capital towards indulgent remodels, money would be more wisely spent ramping up multichannel functions such as click and collect, in-store kiosks and e-commerce.”
Shares Fall
Carrefour fell 1.1 percent to 17.27 euros in Paris. The stock is down 39 percent in the past year.
Fourth-quarter sales at stores open a year or more fell 1.9 percent, excluding currency moves and gasoline, Carrefour said. Macroeconomic conditions are likely to remain “challenging amid an uncertain environment,” Sivignon said.
The retailer converted 31 hypermarkets to its new format in the quarter, taking to 81 the number of Carrefour Planet stores in 2011. The rollout for 2012 will be “pragmatically reviewed country by country,” Carrefour said.
Carrefour plans “very few” hypermarket conversions in the first quarter and capital expenditure may be less this year than last, Sivignon said.
Hypermarket Slump
Fourth-quarter sales at Carrefour stores open at least a year fell 2.8 percent in France and decreased 4.8 percent in the rest of Europe, excluding gasoline, the company said. French hypermarket sales on that basis fell 4.7 percent. Like-for-like food sales at French hypermarkets declined 3.6 percent, while non-food sales decreased 7.2 percent.
Carrefour attributed the drop in fourth-quarter hypermarket sales to weaker discretionary spending and the initial effects of lower prices and more targeted promotions. The retailer said it will accelerate the introduction of its “click and collect drive format” at hypermarkets and supermarkets.
Tesco Plc, the U.K.’s biggest retailer, said last week it would open fewer very large stores as consumers prefer online shopping. Tesco dropped 16 percent on Jan. 12 after it reined in profit expectations after Christmas sales fell 2.3 percent. Wal- Mart Stores Inc. is the world’s largest retailer.
Carrefour’s same-store supermarket sales decreased 0.8 percent, excluding gasoline, while convenience stores and other activities rose 3.3 percent on the same basis. About a third of the convenience network was under the Carrefour banner at the end of December, the company said.
In Latin America, where a proposal to merge Carrefour’s Brazilian unit with Brasileira de Distribuicao Grupo Pao de Acucar collapsed in July, same-store sales rose 5.6 percent, excluding gasoline. Like-for-like sales in Asia declined 3.4 percent as mild weather and regulations restricting markdowns led to a slump in non-food sales, Carrefour said.
Group sales for the year totaled 91.5 billion euros.
--Editors: Sara Marley, Paul Jarvis
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
