Carrefour SA

PARIS – A year into a turnaround drive aimed at rationalizing costs, driving food transformation and bolstering its omnichannel focus, Carrefour has reported what it described as “encouraging results,” revising its 2022 targets implemented early last year.

The world’s second-largest retailer after Wal-Mart Stores Inc. cited a slight increase in its net loss for 2018, which came in at 561 million euros for 2018. This compared with a net loss of 531 million euros in 2017.

Recurring operating income for the retailer was 1.94 billion euros, a decline of 9.2 percent when compared with 2017 numbers restated to account for hyperinflation in Argentina.

“We have launched an unprecedented transformation in 2018. Our encouraging results now allow us to revise upwards a number of 2022 targets,” stated Carrefour chairman and chief executive officer Alexandre Bompard.

“We continue to revitalize our commercial policy, with a strong push in favor of purchasing power and food quality. We are adapting our formats, especially hypermarkets, and accelerating the deployment of our growth formats and a benchmark omnichannel offer. And we continue to improve our operational efficiency.”

The firm said it was revising upwards several of its 2022 targets implemented a year ago in order to drive growth. These include a reduction in assortments of 15 percent by 2020 — especially in non-food categories where it feels it cannot compete, including jewelry, which the retailer is exiting — versus a target of 10 percent previously. Carrefour also announced a global reduction in sales area of more than 4 million square feet and acceleration in the opening of convenience formats, from 2,000 new stores initially planned to 3,000.

It had previously said it would reduce the sales area of its French stores by more than 1 million square feet, allocating space to new formats like its Drive spaces or freeing up space in shopping centers with the potential for new external banners. It is now ramping up the initiative internationally based on the first year of initiatives in this area, Bompard explained during a conference with analysts and journalists held at the company’s Massy headquarters on Thursday.

Carrefour has also raised its cost savings target for 2022 to 2.8 billion euros on an annual basis, versus 2 billion euros previously. In 2018, the firm achieved cost savings of 1.05 billion euros thanks to its transformation plan to make its operational structure simpler and more agile. This involved a total of 4,400 voluntary departures in France, Belgium and Argentina and the exit of 273 ex-Dia discount stores from its scope during the year.

Looking ahead, Carrefour is counting on its more industrialized approach to sourcing and its sourcing alliances signed with Tesco and Système U, for example, to begin to bear fruit.

“We’re very satisfied with all we have accomplished over the past year,” said Bompard. “There is still a lot left to do, but we have established a model that has proved its efficacy.”

When it comes to online, Carrefour saw 30 percent growth in its online food sales last year, in line with objectives, after ramping up initiatives to offer a single web portal per country and signing partnerships with Tencent and Google. “A year ago, we were simply not in the race when it came to e-commerce,” said Bompard.

In March, Carrefour will open its Digital Hub, which will host teams from the Carrefour-Google Lab expert in AI and machine learning as well as more than 300 employees specialized in digital and e-commerce.

The retailer is not aiming to compete online in non-food categories with heavyweights like Amazon, Bompard said. “Food is our battle of battles, the place where we can be a leader is in online grocery sales,” he explained. “I don’t think we can be an online leader in non-food, [and] we have to focus on our priorities.”

In France, the group’s 2018 recurring operating income (ROI) dropped 32.6 percent to 466 million euros, in line with expectations due to weak sales growth, a competitive market environment and investments in competitiveness ahead of cost cuts and in the retailer’s “Act for Food” campaign on food quality.

In the rest of Europe, ROI fell 1.9 percent to 664 million euros, while in Latin America, the group significantly improved its profitability, with ROI of 800 million euros, up 11.9 percent, partly on the back of strong sales momentum and openings in Brazil, e-commerce development and a turnaround in Argentina despite the tough macro-economic environment there. In Asia, ROI also picked up, coming in at 45 million euros, versus 4 million euros a year ago, thanks largely to the solid growth of e-commerce and the adaptation of Carrefour’s commercial model in China.

The company said its 2018 dividend would remain stable at 0.46 euros.

Carrefour shares were trading up 2.16 percent at 17.94 euros mid-afternoon, with the price having risen 20.29 percent since Jan. 1.

As reported, for the full year, group sales reached 85.16 billion euros, falling 2.8 percent and rising 2.5 percent at constant rates. Sales were up 1.4 percent on a like-for-like basis. Taking into account hyperinflation and currency impacts from Argentina, year-end sales were down 3.1 percent to 84.92 billion euros. They rose 1.4 percent on a like-for-like basis.



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