PARIS — Carrefour SA is continuing to see the fruit of its turnaround plan implemented two years ago.
Recurring operating profits for the retailer, the world’s second largest behind Wal-Mart Stores Inc., saw a 6.7 percent rise year-on-year in 2014 to 2.39 billion euros, or $3.18 billion, in line with previous guidance.
“[The year] confirms Carrefour’s dynamism,” chief financial officer Pierre-Jean Sivignon said at the firm’s annual results conference here Thursday. “The group saw its best progress in five years.”
Carrefour said improved profitability in France and the rest of Europe stemmed from its efforts to enhance its multiformat offer to be less reliant on hypermarkets, as well as from an improving economic climate in Spain.
“France illustrated the dynamism of the multiformat model,” Sivignon continued. “In Europe, the recovery is encouraging. In emerging markets, our performance, carried by Latin America, is remarkable. In China, we are evolving our model in order to adapt to the context of frugality in consumption.”
In France, the firm’s recurring operating income increased 6.1 percent to 1.27 billion euros, or $1.69 billion, while in the rest of Europe, it grew 9.6 percent to 425 million euros, or $564.9 million.
In Asia, recurring operating income fell 25.5 percent to 97 million euros, or $128.9 million, largely due to wage increases and a weak environment for consumption in China, where the retailer is reviewing its model.
In Latin America, operating income grew 9.4 percent to 685 million euros, or $910.4 million, thanks to improved profitability in Brazil and resilient business in Argentina, and despite the strong impact of currency depreciation in both markets.
While net income from continuing operations surged 22.9 percent last year to 1.3 billion euros, or $1.73 billion, the firm’s overall net income grew just 0.2 percent to 1.37 billion euros, or $1.82 billion.
Carrefour registered sales excluding VAT of 74.71 billion euros, or $99.3 billion, a 0.2 percent decline in reported terms but up 2.9 percent at constant currency.
Non-food sales, including textiles, have been a key part of the turnaround effort, Sivignon said. Carrefour is focusing its apparel offer on basics, rather than seasonal items, he continued, and is seeing this strategy pay off with increased sales.
Sivignon added that the company would increase its investments in 2015 and was planning to spend between 2.5 billion and 2.6 billion euros, or between $2.78 billion and $2.9 billion at current exchange, compared with 2.4 billion euros, or $3.19 billion, in 2014.
Dollar rates for 2014 are calculated at average exchange rates for the period.
Much of the investment will be dedicated to the continuing remodeling its stores, he said — some 60 hypermarkets in China will get a revamp this year. Carrefour also plans to transform French Dia stores, which it acquired last year, to its existing banners, abandoning the discount channel.
Further priorities for the retailer include the rollout of click-and-collect services, the relaunch of e-commerce in Brazil, plus improved logistics and IT systems.
Sivignon confirmed that the firm would be ready to launch an IPO for its Brazilian activity, its second largest, this year. “We have never said we will launch an IPO in Brazil in 2015, but we will be ready to,” affirmed Sivignon.
In a separate announcement, Carrefour said that its chief executive officer Georges Plassat, widely described as the architect of its turnaround, will be back at work before late April. He is recovering from surgery, as reported.
The market responded well to the results, with shares closing up 2.4 percent at 30.36 euros, or $33.81 at current exchange, on the Paris Bourse on Thursday.