PARIS — Carrefour SA said sales rose 3.9 percent in the first quarter as strong growth in emerging markets partially compensated for continued tough trading conditions across most of Europe.
This story first appeared in the April 15, 2011 issue of WWD. Subscribe Today.
Carrefour, the world’s second largest retailer behind Wal-Mart Stores Inc., posted sales of 24.7 billion euros, or $33.76 billion, in the three months ended March 31, representing an increase of 2.1 percent at constant exchange rates. Dollar figures have been converted at average exchange rates for the periods to which they refer.
Chief executive officer Lars Olofsson noted that, despite a difficult trading environment in Europe, there were “encouraging” signs in the retailer’s smaller format stores in France, its largest market, and a gradual improvement in Belgium and Spain.
“With our continuous cost improvements and three growth engines — emerging markets, [the] Carrefour Planet [hypermarket concept] and the Carrefour branded offer — we are on track to attain our objective of growing sales and current operating income in 2011,” he stated.
The company is expected to provide more detailed guidance when it releases second-quarter results on July 13.
Thursday’s figures come on the heels of a disappointing year for the French retailer, which is trying to turn around its underperforming hypermarket business as part of the “transformation plan” launched by Olofsson after he joined the group in January 2009.
Carrefour’s operating profits in 2010 were hit by significant one-off charges in Brazil and five other countries resulting from audits. More recently, it has faced criticism from shareholders over plans to spin off 100 percent of its hard discount brand Dia and 25 percent of its real estate division, Carrefour Property.
Analysts say the move appears designed to deliver short-term benefits to its largest investors, Blue Capital, the investment consortium of LVMH Moët Hennessy Louis Vuitton chief Bernard Arnault, and investment firm Colony Capital.
In a conference call with analysts, Carrefour chief financial officer Pierre Bouchut declined to comment on reports that Knight Vinke, a U.S activist fund that holds 1.5 percent of the group’s capital, has been lobbying against the spin-off plans, saying he did not know the fund’s arguments for opposing the move.
Carrefour’s revenue in France, which accounts for 40 percent of sales, grew 1.3 percent in the second quarter as traffic in hypermarkets fell 2.2 percent, amid continued intense promotional activity across the industry. In the hard discount segment, stores newly converted to the Dia banner continued to perform well.
Bouchut said Carrefour held a first round of negotiations with food suppliers that led to an average 2 percent price increase in France in late March, and visibility for the rest of the year was still insufficient. He cited strong increases in the price of coffee, chocolate, rice, flour and sugar.
Carrefour has been making a big push on its private label offer, and Bouchut said it would be the key topic at its investor day, due to be held in the fall.
In Brazil, sales were up 22.4 percent in the quarter, making it the group’s second biggest market after France. Discount chain Atacadao continued to post double-digit sales growth, fueled in part by expansion, and Carrefour expects to return to former operating profitability levels in the South American country by the end of 2012.
The retailer said that following French consumer finance company Cetelem’s decision to withdraw from Banco CSF, its personal finance services business in Brazil, it had sold a 49 percent stake in the company to Brazilian private bank Itaú Unibanco for 315 million euros, or $423.77 million. Bouchut said this gave Banco CSF an implied equity value of 785 million euros, or $1.05 billion, corresponding to five times its book value.
Sales in China grew 18.2 percent in the second quarter, thanks in part to solid Chinese New Year sales, although a Chinese government campaign of price inspections, which led to several Carrefour stores being fined, dented sales in February. Carrefour plans to open 22 stores in China in 2011.
In Europe, the rollout of the Carrefour Planet hypermarket concept picked up speed following the launch of six European pilot stores in the second half of last year. Carrefour expects to open 98 Carrefour Planet stores by the end of 2011 and 241 in total by mid-2013.