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PARIS — France’s Carrefour on Thursday reported higher profits and trumpeted 2008 as a “breakthrough” year during which it would speed growth and spin off its property portfolio.
This story first appeared in the March 7, 2008 issue of WWD. Subscribe Today.
The hypermarket operator said net profits in 2007 grew 1.4 percent to 2.29 billion euros, or $3.15 billion at average exchange, from 2.27 billion euros, or $2.85 billion, a year ago, fueled by China and Brazil. Full-year sales advanced 6.8 percent to 82.15 billion euros, or $112.61 billion, from 76.89 billion euros, or $96.59 billion.
The results, which met most analysts’ expectations, came a day after Carrefour’s main shareholding family, the Halleys of France, said they would dissolve a shareholder pact that guaranteed it control of Carrefour.
The move made an investment group that includes Bernard Arnault, head of LVMH Moët Hennessy Louis Vuitton, the retailer’s largest shareholder. Arnault last year acquired a 9.1 percent “strategic” stake in Carrefour with investment fund Colony Capital through Blue Capital.
The Halleys’ decision ignited speculation that Arnault and Colony may want to augment their stake. Blue Capital last year pledged not to grow its holdings beyond the Halleys’ controlling 10 percent before this June.
Carrefour chairman José Luis Duran said he didn’t expect any significant changes because of the new majority shareholder. “Today we don’t need to speculate,” he said, adding Arnault and Colony had already been involved in Carrefour’s supervisory board for a year.
Duran promised that 2008 would be a “breakthrough” year. He said the company would gain momentum in France and that it would “create value” through its real estate.
Duran said sales in the first two months of the year were good, led by emerging markets. He promised brisk profit growth for this year. “We have engaged ourselves to deliver operating profits higher than sales,” Duran said in a presentation, adding sales for 2008 should advance 6 to 8 percent, excluding acquisitions.
“We are not naive about the consumption environment,” he added. “The market is not going to be easy. We are making the brand work harder.”
Duran said efforts were being made to “rethink” the retailer’s hypermarket model by simplifying layouts and streamlining product offers. “It’s already yielding important results,” said Duran.
Carrefour’s growth in recent years has been spurred by emerging markets like Brazil, China and Poland, while its core home market of France has been hamstrung by weak consumer spending and stiff cost competition from discounters.
“Growth markets now account for 25 percent of our sales,” said Duran. “We expect growth markets to be a main contributor to growth.”
Sales in France last year advanced 1.1 percent to 37.62 billion euros, or $51.57 billion, while sales in the rest of Europe grew 6.9 percent to 30.84 billion euros, or $42.27 billion.
Meanwhile, sales in Latin America bounded 38.5 percent to 8.2 billion euros, or $11.24 billion, while sales in China jumped 11.6 percent to 5.48 billion euros, or $7.51 billion. Duran said the company would continue to streamline its operations by divesting underperforming businesses while bulking up in more promising markets. Carrefour this year sold businesses in Portugal and Switzerland while acquiring operations in Indonesia and Poland.