PARIS — Carrefour SA said sales fell 0.3 percent in the second quarter as growth in emerging markets failed to offset its continued poor performance in austerity-hit Southern Europe and in its core market, France.
This story first appeared in the July 13, 2012 issue of WWD. Subscribe Today.
Carrefour, the world’s second-largest retailer behind Wal-Mart Stores Inc., posted sales of 21.71 billion euros, or $27.9 billion, in the three months ended June 30. Dollar figures have been converted at average exchange rates for the periods to which they refer.
On a constant currency basis and excluding gas, like-for- like revenues fell 1.3 percent in the quarter.
Carrefour did not provide official guidance for 2012, but chief financial officer Pierre-Jean Sivignon said the retailer expected recurring operating income to fall within the range of 2.03 billion euros to 2.09 billion euros, or $2.55 billion to $2.63 billion, forecasted by analysts.
“We are comfortable with that range,” he said during a conference call.
The ailing retailer is under new management since May, when Georges Plassat took over as chairman and chief executive officer following the anticipated departure of Lars Olofsson. Under his predecessor’s three-year tenure, Carrefour struggled to turn around its underperforming hypermarket business and posted a string of profit warnings, causing the shares to fall by more than 40 percent in 2011 alone.
Plassat has warned that it will take three years to turn around the company, which is faced with a slowdown in consumer spending not only in the euro zone, but also in more recent markets like China.
“We will face headwinds, let there be no illusions,” he told Carrefour’s annual general meeting in June. “Consumer spending is falling everywhere worldwide.”
In the second quarter, sales in France were down 2.1 percent to 9.65 billion euros, or $12.4 billion, with revenues at the hypermarkets division falling 4.4 percent, while supermarket sales were down 0.8 percent. The declines were driven by a fall in nonfood sales, as bad weather impacted sales of apparel and seasonal goods.
“The temperature is obviously bizarre, to say the least, and the humidity level is also bizarre,” Sivignon said, adding that it was too early to quantify the impact of the unseasonal weather.
While Carrefour no longer breaks out percentage increases in food and nonfood items, Sivignon said like-for-like food sales growth was positive in France for the first time in more than a year.
He added that the sales decline at hypermarkets and supermarkets were due to the anticipated effects of the action plan announced by Noël Prioux, executive director of Carrefour France, in the second half of 2011. This has led to a reduction in promotions, in favor of an “everyday low price” strategy.
“This inevitably has a near-term impact on sales, but should gradually lead to improved performance along with an improved price perception,” Sivignon said, adding that pricing image was the ultimate driver of like-for-like growth.
“I think the next two quarters will have to show in a more clear manner if what was implemented basically in August of last year — and that includes the everyday low price strategy — is indeed bearing some fruits,” he added.
Sales in Spain and Italy were down 5.3 and 5.5 percent, respectively, but here, too, Sivignon saw some glimmers of hope, saying the rate of sales contraction in Spain slowed versus the first quarter, while in Italy, nonfood sales in hypermarkets were recovering.
“While we are not satisfied with falling sales, this constitutes a resilient performance given the tough trading environment in which we are currently operating,” he noted.
Revenues in Asia rose 14 percent in the quarter, though a large portion of this was linked to the appreciation of the Chinese yuan. Excluding currency effects, like-for-like sales in the region fell 2.3 percent in the quarter.
Latin America posted a 2.7 percent increase in revenues. Stripping out currency effects, like-for-like sales were up 6.9 percent during the period, helped by the continued growth of the Atacadao format in Brazil. In reported terms, Brazil posted a 3 percent sales drop, reflecting the depreciation of the real currency.
Carrefour said the second-quarter figures had been adjusted to take into account the sale of its stake in its joint venture in Greece. Its operations there have been reclassified as “discontinued,” and the second-quarter 2011 figures have been restated pro-forma, excluding Greece.
The French figures, meanwhile, reflected the end of Carrefour’s franchise agreement with Altis Group, effective April 6, and the integration of operator Guyenne et Gascogne on June 1.
Plassat said last month the group was mulling whether to sell all or part of its stake in ventures in Turkey and Indonesia, among other countries. However, he said it was committed to remaining in Brazil and China.