Carrefour Sales Rise 6.7 Percent in Third Quarter

Retailer revises down full-year operating profit target due to one-off charges in Brazil.

PARIS — Carrefour SA said sales rose 6.7 percent in the third quarter, but it lowered its operating profit guidance for 2010 due to one-off charges in Brazil resulting from an ongoing audit, expected to have a total impact of 180 million euros, or $251.3 million. Carrefour, the world’s second-largest retailer behind Wal-Mart Stores Inc., posted sales of 25.61 billion euros, or $33.05 billion, in the three months ended Sept. 30, representing an increase of 2.6 percent at constant exchange rates.

This story first appeared in the October 15, 2010 issue of WWD.  Subscribe Today.

Dollar figures have been converted at average exchange rates for the periods to which they refer.

“We are particularly satisfied by our strong sales in emerging markets, such as China and Latin America, and by encouraging signs of recovery in such markets as Belgium, Poland and Taiwan,” chief executive officer Lars Olofsson said.

Carrefour said it now expected an operating profit of 3 billion euros, or $4.19 billion, in 2010, down from a previous forecast of 3.1 billion euros, or $4.33 billion.

A new management team took over in Brazil in late August and will complete the audit by yearend in order to determine the final scope of adjustments, chief financial officer Pierre Bouchut told analysts in a conference call.

“To date, we have no evidence of any fraud or misconduct of our managers in this specific case, but be assured that Carrefour’s new management team is fully committed and fully determined to shed light on the situation [and] eradicate uncertainties and bad practices, if any,” he said.

The one-off charge reflected imbalances that had accumulated over several years. It consists mostly of provisions for inventory write-offs, after poor sales in Carrefour’s Brazilian hypermarkets left it overstocked; uncollected rebates from suppliers, due to missed sales targets; insufficient documentation in ongoing tax litigation, and depreciations.

Nonetheless, Carrefour said the 2010-2012 “transformation plan” — launched by Olofsson after he joined the group in January 2009 — remained on track.

Bouchut said the group was fully confident in its ability to deliver cost cuts of 500 million euros, or $698.16 million, this year together with purchasing savings of at least 230 million euros, or $321.15 million, to be reinvested in prices.

Revenue in France — which accounts for 40 percent of the group’s sales — grew 0.8 percent in the third quarter, compared with a 2.7 percent increase in the second quarter, even though traffic in hypermarkets improved compared with the two previous quarters.

“In a tougher — according to us — promotional and competitive environment in August and September, we had a weak back-to-school performance both in hypermarkets and supermarkets, largely attributable to less effective promotional efforts,” said Bouchut.

However, the group was “very encouraged” by the initial results from its pilot stores for the new Carrefour Planet hypermarket concept, which it plans to roll out to 500 stores in France, Spain, Italy, Belgium and Greece by early 2013.