PARIS — Luxury titan Bernard Arnault will have to wait a little longer before seeing a return on his investment in beleaguered French retailer Carrefour SA.
This story first appeared in the June 19, 2012 issue of WWD. Subscribe Today.
That was the message from Georges Plassat in his first public speech since taking over as chairman and chief executive officer of Carrefour, the world’s second-largest retailer after Wal-Mart Stores Inc.
Speaking to the company’s annual general meeting here on Monday as unionists demonstrated noisily outside, Plassat said it would take three years to turn around Carrefour, which is faced with a slowdown in consumer spending not only in the debt-ridden euro zone, but also in emerging markets like China.
“We will face headwinds, let there be no illusions,” the plainspoken executive told the assembly. “We must not gaze at our navels here in Europe — consumer spending is falling everywhere worldwide.”
Blue Capital, the investment fund owned by Groupe Arnault and Colony Capital, is Carrefour’s largest single shareholder with around 16 percent of the share capital and 22 percent of the voting rights. The fund was rumored to have precipitated the departure of Plassat’s predecessor Lars Olofsson, during whose three-year tenure Carrefour struggled to turn around its ailing hypermarket business and posted a string of profit warnings, causing the shares to fall by more than 40 percent last year alone.
Shares in Carrefour closed down 3.17 percent to 14.03 euros, or $17.73, on the Paris Stock Exchange on Monday.
Olofsson submitted his resignation in May, shortening the planned transition period between the two executives. Shareholders booed at the mention of his name, with several protesting against the terms of his retirement package, which include a noncompete clause worth 1.5 million euros, or $1.9 million at current exchange.
Plassat dismissed suggestions by other shareholders that Arnault, who did not attend the annual meeting, was exerting undue pressure behind the scenes. “I can tell you that we have worked with total freedom so far,” he said.
The ceo said that upon arriving at Carrefour 10 weeks earlier, he found the company “dazed” and its senior managers “spaced out” — adding jokingly that this assessment appeared to pain Sébastien Bazin, a representative of Colony Capital on the Carrefour board, who sat in the front row.
“There is no reason to think that this very beautiful French company won’t eventually recover the splendor which it has temporarily lost,” Plassat continued, but he warned, “We won’t achieve anything solid in less than three years.”
Plassat appeared comfortable taking questions from the floor, including those from critics, who included a labor representative flanked by several dozen fellow union members wearing orange baseball caps and silently wielding protest signs.
He listed the priorities for Carrefour as reducing debt, decentralizing operations and switching to a multiformat model. Plassat said the company would have to become leaner, but stopped short of announcing any job cuts.
“For several years, this group has not had the cash to finance its ambitions,” he said. “The important thing is for the group to restore its financing capacity in order to defend its market share in the face of competition.”
Plassat gave a taste of things to come, when Carrefour on Friday revealed it was pulling out of its joint venture in Greece, where sales have fallen sharply as a result on the ongoing economic crisis. The decision came two days before a general election won by the conservative, pro-bailout New Democracy party.
Carrefour sold its stake in Carrefour Marinopoulos to its local partner, the Marinopoulos Group, which will become its exclusive franchisee in Greece, Cyprus, Bulgaria, Albania and other Balkan countries. The sale will result in a mostly noncash charge of around 220 million euros, or $274 million.
The previous day, the retailer said it bought Argentine discount supermarket chain EKI for an undisclosed sum to strengthen its footprint and expand its convenience store network in the Latin American country.
Plassat said the group would similarly mull whether to sell its stake in joint ventures in Turkey and Indonesia, but said it intended to remain in Brazil and China, despite signs of a slowdown in sales in Asia’s leading economy.
“It is obvious that we won’t be able to defend our positions everywhere, at least not while retaining majority stakes in all the zones where we are present. We have to curb that and progressively reduce the company’s debt to give ourselves the margin to defend our very strong positions in Europe,” he said.
Carrefour has been losing market share in France, which accounts for a third of the group’s sales. Plassat revealed the Carrefour Planet hypermarket concept introduced by Olofsson would be dropped, advocating a return to a strategy based on multiple formats.
“Carrefour, which was the king of the hypermarket, must accept the idea that it has become a multiformat retailer,” he said, adding that the focus would shift back to food, with nonfood products brought in on a seasonal basis in order to keep inventories lean.
Including franchises, Carrefour employed 412,443 people in 33 countries as of Dec. 31. The group had 9,771 stores, including 1,452 hypermarkets, 2,995 supermarkets, 5,170 smaller format retailers and 154 cash-and-carry stores.
The shareholders’ assembly voted in favor of giving Plassat a three-year mandate, with 76.7 percent in favor and 22 percent against. It narrowly approved Olofsson’s compensation package, with 51.3 percent in favor and 48.1 percent against.
But in a sign of growing shareholder revolt Europe-wide, the meeting rejected two resolutions covering the attribution of stock options and shares, performance related or not, to company employees in 2012.