PARIS — Carrefour SA said it expects its operating profit to fall 23 percent in the first half and launched a worldwide action plan to turn around its fortunes, after sales rose just 1.6 percent in the second quarter, impacted by a continued deterioration of hypermarket sales in France.

This story first appeared in the July 14, 2011 issue of WWD. Subscribe Today.

“Carrefour is devising and implementing an action plan with the objective of attaining the group’s 2011 target of a progression in sales and current operating income,” stated chief executive officer Lars Olofsson. “In addition to France, all of our teams are now being mobilized to support this goal.”

The group, which has issued several profit warnings in the last year, suffered a further blow to its prospects with the collapse of a planned merger deal in Brazil.

Carrefour announced it had dropped plans to merge its Brazilian assets with those of Companhia Brasileira de Distribuição after the Brazilian National Development Bank announced overnight it was rescinding its proposed financing for the deal.

The world’s second largest retailer behind Wal-Mart Stores Inc., Carrefour forecast an operating profit of 760 million euros, or $1.06 billion, in the first half, versus 989 million euros, or $1.31 billion, during the same period in 2010. Dollar figures have been converted at average exchange rates for the periods to which they refer.

“This drop is largely attributable to our French operations’ underperformance,” Carrefour chief financial officer Pierre Bouchut told analysts on a conference call.

The performance worsened in May and June, after Carrefour made the mistake of raising prices in France earlier than its competitors, he added.

In the first six months of the year, operating profit fell 35 percent in France, decreased slightly in the rest of Western Europe and posted “solid growth” in emerging markets, he said.

Bouchut noted the consensus market forecast called for the retailer to post an operating profit of 2.6 billion euros, or $3.17 billion at current exchange, in 2011 as a whole. Carrefour will provide guidance and details of its action plan when it publishes first-half results on Aug. 31.

The retailer posted sales of 22.4 billion euros, or $32.23 billion, in the three months ended June 30. Sales were up 1.6 percent in France, down 0.7 percent in other Western European markets and up 11.3 percent in Brazil, which has now become the second-largest contributor to group sales after France.

Carrefour had hoped its planned linkup with CBD, whose trading name is Grupo Pão de Açúcar, would result in the creation of Brazil’s largest retailer, but the project ran into strong opposition from the start from rival French supermarket operator Groupe Casino, which holds 43 percent of GPA’s capital.

“With this BNDES decision not to participate in the project, we today note that the necessary conditions to the completion of this project have not been met,” said Bouchut. “This being said, Carrefour will continue to explore all other major value creative opportunities in line with our strategy and notably in emerging markets.”


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