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Markdowns Hurt Carrefour Profits in Half

Double-digit losses in its core French market hamstrung first-half profits at Carrefour, the world's second-largest retailer after Wal-Mart.

PARIS — Double-digit losses in its core French market hamstrung first-half profits at Carrefour, the world’s second-largest retailer after Wal-Mart.

The French hypermarket operator said net income in the six months ended July 31 dropped 6.9 percent to 687 million euros, or $870.9 million, as losses accumulated from deep discounting at its struggling French stores. Currency conversions for first-half figures were made at average exchange rates during the period.

The results were broadly in line with analysts’ consensus expectations, and Carrefour stock finished up 1.27 percent to 38.15 euros, or $47.08 at current exchange, in trading on the Paris Bourse.

Over the last year, Carrefour has battled tepid retail sales in France with an aggressive cost-cutting campaign to attract shoppers who had defected to hard-discount chains.

Those efforts have shown fruit. But although Carrefour said it gained 0.7 percent in market share in France, it said profitability at its French units slid 14.8 percent.

France accounts for more than half of Carrefour’s sales.

Carrefour said profits grew 15.5 percent to 393 million euros, or $498.2 million, in its operations elsewhere in Europe, while profits increased 38.1 percent to 87 million euros, or $110.3 million, in Asia.

Carrefour said it remained “prudent” for the end of the year, promising to deliver more price cuts in France while looking to build profitability in other countries.

As reported, first-half sales rose 2.6 percent to 35.44 billion euros, or $44.93 billion.

This story first appeared in the September 2, 2005 issue of WWD.  Subscribe Today.