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Soft Sales at Hypermarkets Deflate Carrefour Earnings

PARIS — Carrefour, the world’s second-largest retailer behind Wal-Mart, on Thursday reported a 24 percent fall in second-half net profit, deflated by lackluster sales at its key French hypermarkets.<BR><BR>Meanwhile, the French retailer...

PARIS — Carrefour, the world’s second-largest retailer behind Wal-Mart, on Thursday reported a 24 percent fall in second-half net profit, deflated by lackluster sales at its key French hypermarkets.

Meanwhile, the French retailer said it had sold unprofitable chains in Mexico and Japan as part of a wide-ranging strategy to pay down debt and reorganize operations, both in France and internationally.

Second-half net profit fell to 850 million euros, or $1.06 billion, from 1.11 billion euros, or $1.3 billion, a year ago, reflecting exceptional charges including closures, divestments and restructuring, Carrefour said.

Full-year net profit declined 15 percent to 1.38 billion euros, or $1.72 billion, behind analysts’ consensus expectations. Second-half sales increased 3.3 percent to 38.12 billion euros, or $47.42 billion. Dollar figures are at the average exchange rate.

In a news conference, Carrefour’s recently appointed president of the management board, Jose-Louis Duran, declined to provide profit or sales projections for the year. He also refused to pinpoint sales developments over the first two months of the year.

But Duran said Carrefour would continue price cuts in France in an attempt to shore up market share. During the past few years, Carrefour has been hurt by fierce discount competition in France.

Carrefour said EBIDTA for 2004 declined 6.4 percent in France, while it rose 9.4 percent in the rest of Europe.

“We can gain market share in France,” said Duran, who added the company will continue to make investments to reduce prices. Meanwhile, Duran said Carrefour would continue to sell unprofitable businesses.

He said the objective set in September to sell 1 billion euros, or about $1.2 billion, in assets had almost been reached. “We have already raised 900 million euros,” he said. “We will sell other businesses in countries where we are not among the top three retailers in terms of market share.”

He said Aeon, Japan’s largest retailer, paid about 81.5 million euros, or $101.4 million, for Carrefour’s eight hypermarkets in Japan; and that Mexican retailer Chedraui paid about 425.6 million euros, or $529.4 million, for Carrefour’s 29 hypermarkets in that country.

Carrefour has been involved in a vast reorganization. In February, controlling family shareholders helped eject Daniel Bernard, who had been chairman and chief executive for 13 years. Over the last couple of years, Bernard had struggled to stimulate sales in France, where discount competition has recently grown fierce.

Besides Duran, who was elevated from chief financial officer, the company appointed Belgian Luc Vandevelde, who oversaw restructuring of Britain’s Marks & Spencer, as president of the supervisory board.

The changes will be put up for approval at a general shareholders’ assembly here this April.