By  on August 29, 2013

PARIS — Shares in Carrefour SA increased 5.6 percent Thursday as the retail giant posted a 4.9 percent rise in first-half operating profits, and said business in its core French market is now demonstrating “good profitability” in all formats.

While acknowledging that Carrefour continues to face subdued demand in Europe and currency headwinds and wage inflation in Latin America, chief executive officer Georges Plassat assured the company is “on the path to self-confidence.”

Operating profits amount to 766 million euros, or $994 million. Net earnings swelled to 902 million euros, or $1.17 billion, versus a loss of 31 million euros, or $40.2 million, in the year-ago half.

Carrefour’s reorganization under Plassat, which included the sale of some of its international business, plumped the firm’s coffers, with the off-loading of a 25 percent stake in Majid al Futtaim Hypermarkets netting 530 million euros, or $687.8 million. The partners have operated in the Middle East, northern Africa and central Asia since 1995.

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Carrefour has also reduced its holdings in partnerships in Turkey and Indonesia. Plassat noted there would be no further disposals in the near term.

The world’s second-largest retailer behind Wal-Mart Stores Inc. had reported revenues in July, noting sales slipped 0.6 percent to 20.46 billion euros, or $26.71 billion, in the three months ended June 30. Dollar figures are calculated at average exchange for the periods to which they refer.

In the half, sales eased 0.8 percent to 36.46 billion euros, or $47.32 billion. Stripping out the impact of currency fluctuations, revenues gained 1.4 percent.

Carrefour noted that the “persistently difficult economic environment” in southern Europe dragged down sales on the Continent, falling 4.5 percent. Profitability in Italy was “strongly impacted,” but Plassat assured, “I have reason to believe Italy will get back on its feet.”

Sales gained 2.7 percent in Asia and 1.1 percent in Latin America, where Carrefour came up against a sharp depreciation in the Brazilian real and the Argentine peso. At constant exchange rates, Latin American sales would have gained 13.3 percent.

Sounding sanguine, Plassat said his decentralization of the company — giving store managers more control — and tight cost controls are bearing fruit. He highlighted improving margins in France, and a brightening picture across hypermarkets, supermarkets and convenience store formats.

To the amusement of analysts, Plassat went into the intricacies of banana ripeness, highlighting how shrinkage and transport costs must be tightly managed.

He said Carrefour has even been making progress with its apparel business, hinged on the in-house Tex brand, after too closely modeling itself on fast-fashion players in recent years. “In France, we want to get Tex back on course,” he said. “Clothing is doing better.”

Home wares, electronics and seasonal goods remain challenging for the retailer, he allowed.

During a question-and-answer session, Plassat acknowledged that Carrefour must step up expansion in China, which gained momentum in the second quarter, as did Taiwan.

But given the high earning power of Europeans, he said Carrefour would continue to eke out growth on its home turf and invest in upgrading and expanding formats, particularly in France, which accounts for almost half of its sales.

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