PARIS – French retailer Carrefour SA got the go-ahead from its shareholders Tuesday to spin off if its hard discount chain Dia, at the end of a stormy annual general meeting where minority shareholders and union representatives voiced their anger over the group’s disappointing performances.
This story first appeared in the June 22, 2011 issue of WWD. Subscribe Today.
The resolution was approved by 77 percent of shareholders, clearing the way for Dia to be listed on the Madrid stock exchange on July 5.
Carrefour, the world’s second largest retailer behind Wal-Mart Stores Inc., first put forward the spinoff in March as part of a controversial plan to sell some assets, after it rattled markets last year by issuing a profit warning and restating one-off charges in Brazil resulting from an audit.
Carrefour chief executive officer Lars Olofsson had argued that the move would boost the company’s valuation and allow it to focus on turning around its key market, France, following its warning last week that current operating income in its domestic market was down 35 percent in the first half.
Olofsson was the target of protests from the moment he started speaking, when a group of women’s rights protesters unfurled a banner on stage to bring attention to the lack of women in senior management positions at the firm. Outside, several hundred labor representatives blasted horns but were barred from entering by anti-riot police.
Olofsson said he understood shareholders were disappointed by the poor results posted in France, which accounts for some 40 percent of the group’s sales, but pledged to stick to the three-year “transformation plan” he implemented after joining Carrefour in January 2009.
“We are no doubt facing headwinds and even storms,” he said. “But Carrefour is on the right track and is moving in the right direction.”
Fabrice Rémon, head of the French division of shareholder consultancy Deminor, likened the Dia spinoff to “selling the family jewels.” Michel Enguelz, representing the Force Ouvrière union at Carrefour, said staff had lost confidence in the company, pointing to a series of recent strikes and court cases over pay.
Others criticized what they deemed as the excessive influence of Carrefour’s largest investor, Blue Capital, the investment consortium of LVMH Moët Hennessy Louis Vuitton chief Bernard Arnault and investment firm Colony Capital that holds 13.5 percent of Carrefour’s capital.
One shareholder called for Arnault to resign from Carrefour’s board of directors, but a subsequent vote reelected him to the position for three years.
In a meeting of the board of directors held after the assembly, Amaury de Seze stepped down as chairman. The board appointed Olofsson to be both chairman of the board and ceo, and named de Seze lead director.
The move should strengthen Olofsson’s grip, weakened by the departure of several senior executives in recent months. Carrefour last week named veteran Noël Prioux as the new executive director for France, replacing James McCann, who left in May after just over a year in charge of the domestic unit.
But confusion remains about the management’s strategy, amid media reports that Carrefour has reached out to Brazilian retail group Companhia Brasileira de Distribuiçao (CBD) to discuss merging their activities in the South American country – a move that would contradict its pledges of focusing its efforts on the French market.
In response to a written question, Carrefour said rumors that it would sell its Brazilian assets were “completely unfounded.” Olofsson said emerging markets – in particular China, Indonesia and Brazil – were key to Carrefour’s future growth, but he declined to be drawn on its possible plans in Brazil.
“I don’t comment on market rumors, but I confirm that it is my duty to follow closely what is happening in all the markets where we operate,” he said.
Olofsson said Carrefour would retain its ranking as Europe’s top retailer and the second worldwide despite the spinoff of Dia, the world’s third largest hard discount brand with sales of around 10 billion euros, or $13.3 billion, in 2010.
“The new Carrefour will be more focused and more dynamic,” he said.