PARIS — Carrefour SA outlined progress on its wide-ranging restructuring program as it reported a 1.4 percent organic sales rise in the second quarter weighed down by weak consumption in Europe.
The world’s second largest retailer after Walmart Inc. posted second-quarter sales of 20.81 billion euros, flagging competitive pressure and a “less buoyant” consumer environment, particularly in Italy. Weak consumption in Southern Europe, including Spain put pressure on top line growth in Europe over the first half of the year while business was stronger in Eastern Europe, executives told analysts on a conference call, citing Poland and Romania.
In Latin America, the group’s second largest region, Carrefour saw improved trends over the period and sales rose 8.4 percent on an organic basis. Sales in Asia were down 4.7 percent on an organic basis with stiff e-commerce competition in China, where the company is working to reduce costs and has closed a loss-making store.
Chief executive officer Alexandre Bompard, who is steering a broad overhaul to adapt to shifting consumption online, said the business model was “under control,” citing an increase in recurring operating income at constant exchange rates and growth in cash generation.
“After six months of intense activity, the Carrefour 2022 plan is already delivering significant advances in a very large number of areas, including the development of the omnichannel offer, a revamped commercial proposition, major projects in the food transition area, cost reduction and strategic partnerships,” he noted in a statement.
The company, which recently off-loaded 273 stores that were formerly part of the discount chain Dia and has forged a series of partnerships for purchasing and improving digital expertise, posted a net loss of 861 million euros in the first half. Recurring operating income for the first half was 597 million euros, up 36 million euros from the previous year at constant exchange rates. Carrefour does not release quarterly earnings.
In a conference call with analysts and journalists, Bompard and chief financial officer Matthieu Malige were pressed for details of the overhaul, which touches the core of how the company has operated over the years.
A key issue is how to manage the space occupied by its sprawling big-box stores, or hypermarkets—a model invented by the group in the Sixties offering a range of food and household items in the same space. Bompard cited plans to reduce space in France, noting the company is considering a number of options including opening outlets in the freed space or handing it back to commercial centers. In Belgium, the company is looking at how to convert them into supermarkets, and in other markets, like China, has decided to close underperforming hypermarkets altogether. When it comes to the group’s non-food products, Bompard, who built his corporate reputation in France by merging book and cd seller Fnac with a home appliance company Darty, said he was “absolutely convinced we have to have a partner.”
As for groceries, the executive is focusing on organic produce and has set a goal of reaching 5 billion euros in sales of organic products in 2022. Carrefour earlier this month bought a chain of organic produce stores called So.bio from Southwest France that it plans to develop throughout the country.
The company faces tough competition in its home market, where grocers are locked in a fight for market share against a backdrop of sluggish consumption. Carrefour executives told analysts they were not overly obsessed with market share in the country as they focus on the broader restructuring of the company.
Relying on partnerships to bolster its defenses, Carrefour recently forged a high-profile tie-up with Google for the digital sphere, and with Tesco in the U.K. for a purchasing alliance. Other agreements include one with Tencent in China, which is still considering taking a stake in Carrefour, as well as the French post office.
In seven countries, the group has trimmed down the entry points to its e-commerce to one and is on track to launch its new online site in France in the last quarter of the year. It also has rolled out home delivery in 9 countries with express 1-hour delivery available in 6 countries, executives said. Food sales online grew 30 percent over the first half.