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Carrefour Profit Jumps 12.6%

PARIS — Carrefour, the world’s second-largest retailer behind Wal-Mart, is pushing on the accelerator.<BR><BR>On Wednesday, the French hypermarket operator reported higher-than-expected first-half profit, confirmed a target for full-year...

PARIS — Carrefour, the world’s second-largest retailer behind Wal-Mart, is pushing on the accelerator.

On Wednesday, the French hypermarket operator reported higher-than-expected first-half profit, confirmed a target for full-year sales growth of 5 percent and vowed to ramp up its international expansion.

In the six months ended June 30, net profit rose 12.6 percent to 531 million euros, or $651.9 million. Results beat consensus estimates of about 515 million euros, or $632.3 million. As reported, sales in the period climbed 2.9 percent to 34.55 billion euros, or $42.42 billion, boosted by international operations as spending lagged in its core French market. Dollar figures are at the average exchange rate.

Chief executive Daniel Bernard told a gathering of reporters here that the firm expected to post double-digit earnings per share and the company would increase its dividend payout and buy back shares.

He said net debt would be cut by 20 percent by 2006 and Carrefour planned to dispose of noncore businesses and nonprofitable stores. The news drove Carrefour stock up 5.78 percent to close at 40.81 euros, or $49.81 at current exchange, in trading Wednesday on the Paris Bourse.

Bernard said the firm, which runs the Champion, Shoppi and Proxi supermarkets and the Dia hard discount chain, was also eyeing “tactical” acquisitions over the next year that would “increase market share in existing countries.”

This signaled a move to more aggressive expansion after an emphasis on containing costs and organic growth. To wit, Bernard pledged to open at least 10 million new square feet over the next year, including some 2 million in France. From 1999 to 2002, Carrefour added only 400,000 square feet of new space in France.

Meanwhile, Bernard said Carrefour hoped to ignite sales in France by slashing prices. Carrefour already invested 135 million euros, or $166 million, in price cuts in the first half and plans to spend another 200 million euros, or $244 million, to lower prices in the second.

Bernard’s comments coincide with a new price reduction measure designed to stimulate consumer spending in France. Part of the finance ministry’s effort to spur the country’s economy, the measure calls for cuts on average of 2 percent on major food, beauty and home cleaning brands.

This story first appeared in the September 2, 2004 issue of WWD.  Subscribe Today.

Bernard said Carrefour’s prices stood at historically low levels at the end of the half and that they would continue to drop.

Outside of France, Bernard said Carrefour would open more hypermarkets in China this year than in any other country, while also developing business in emerging markets such as Thailand, Korea, Indonesia, Turkey and Poland.

— Robert Murphy