PARIS — Shares in Carrefour SA fell Thursday despite a rise in operating profit in the first half as investors questioned whether the French retailer can protect its profit margins against aggressive price competition in its core domestic market.
Carrefour closed down 4.8 percent to 25.83 euros, or $35.24 at current exchange, on the Paris Stock Exchange.
The world’s second-largest retailer behind Wal-Mart Stores Inc. said recurring operating income rose 7.9 percent in the first half to 833 million euros, or $1.14 billion, as profitability improved in Europe and Latin America, compensating for continued softness in China.
This represented a rise of 13.8 percent at constant exchange rates.
Adjusted net profit rose 16.7 percent to 274 million euros, or $376 million, in the six months to June 30, Carrefour said on Thursday. Dollar rates are calculated at average exchange rates for the period in question.
Carrefour said organic sales, excluding petrol, rose 4.3 percent in the first half, their highest growth rate in five years.
Georges Plassat, chief executive officer of Carrefour, qualified the result as “acceptable” in a generally morose macroeconomic context. He added that the group had entered into the second phase of its three-year transformation plan, launched in September 2012.
Under its wide-ranging turnaround plan, Carrefour has shed operations in countries where it does not have a leadership position or a reasonable prospect of achieving sizeable market share. In parallel, it has revamped activities in Europe by cutting prices, diversifying stores and streamlining internal operations.
In France, its operating margin rose to 3 percent in the first six months of the year from 2.8 percent in the same period in 2013, helped by improved transportation and a reduction in lost or stolen products. Analysts questioned whether cost savings could compensate for investment in price going forward.
Plassat said France, which posted a 6.9 percent increase in recurring operating income in the first half, would benefit from the group’s decision to buy back Dia France, the French discount store chain operated by Distribuidora Internacional de Alimentación SA of Spain.
With 800 points of sale and annual revenues of 2.2 billion euros, or $3 billion, Dia will allow Carrefour to pursue its repositioning on city-center formats and to reinforce its market share in Paris and southeastern France, where it lags behind the competition, Plassat said.
The retailer is also counting on its purchase of 53 northern Italian supermarkets under the Billa banner to bolster its action plan in that struggling market, although Plassat cautioned that it would probably take another two years before Italy showed signs of improvement.
Nonetheless, profitability improved in the region overall. European countries, excluding France, recorded a 19.1 percent rise in recurring operating profit in the first six months of the year.
In Latin America, operating profit rose 13.4 percent, driven by the good performance of Brazil and Argentina. The operating margin jumped 70 basis points to 3.8 percent.
Plassat said Argentina’s debt default would likely have a strong impact on the retailer’s recurring operating income, but the effect should be mitigated in local currency terms. Risks included a drop in consumption, in particular of nonfood items, a rise in price competition and a slowdown in financial services, he said.
“We are going to slow down our investment plan, which was not extremely copious, in order very clearly not to place ourselves at risk in terms of cash flow, and we are going to support them as best we can,” he said.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast