Carrefour SA

PARIS — Carrefour SA reported a 12.1 percent drop in first-half operating profit, weighed down by tough trading conditions in its home market.

Recurring operating income totaled 621 million euros in the first six months of the year, down from 706 million euros for the same period last year as weak consumption prompted stiff competition among grocers in France.

“The industry was highly competitive and promotional and clearly this was having an impact on our profitability,” chief financial officer Pierre-Jean Sivignon told a conference call with analysts and journalists.

It was Carrefour’s first earnings report since its chief executive officer Alexandre Bompard took the helm last month.

Bompard spoke briefly on the conference call, noting that the first-half results “emphasize the need to rapidly address the challenges” facing the retailer.

He suggested the big-box retail model is wanting. First developed by the company in the Sixties, hypermarkets have faced increasing competition from smaller and more convenient stores in recent times, pushing Carrefour to gradually increase the proportion of business from smaller stores.

“We also need to breathe new life into our hypermarkets, notably in France — the hypermarket has been the leading format in most of our markets over the past decades, however it needs to be reshaped and adapted to the rapid change of consumer behavior and the ongoing switch to online offers of business,” said Bompard.

He pledged to focus on improving the company’s performance in the coming months and to provide detail of progress by the end of the year.

The company also announced its first management change since Bompard took over, naming Laurent Vallée as general secretary, a role spanning legal and public affairs. Vallée replaces Jérôme Bédier effective immediately.

Carrefour said that it expects the operating environment in some countries to “remain difficult” for the rest of the year and revised its annual growth sales target, at constant exchange rates, to between 2 percent and 4 percent from its previous range of between 3 percent and 5 percent. Sivignon attributed the adjustment to a drop-off in food price inflation in Brazil.

Despite the steep decline in food inflation, the company said that sales in Brazil grew 9.5 percent at constant rates over the second quarter. Sivignon called the performance “notable” while pointing out that food inflation was “continuing to decline as we speak.”

In China, where sales over the second quarter slipped 5.9 percent at constant rates, the company is “continuing the repositioning of our model,” explained Sivignon.

The world’s second largest retailer after Wal-Mart Stores Inc., Carrefour last month flagged a “persistently challenging market” in France when it announced sales figures for the period. Its sales in the first half rose 3.2 percent at constant exchange rates to 38.53 billion euros.

Carrefour said full-year recurring operating income should be in line with that of the first-half results, citing the promotional environment in France, a slower-than-expected recovery in Argentina and investments in the digital sphere in Europe. Sivignon said the company invested in price cuts in both hypermarkets and supermarkets.

Bompard, who is credited with positioning the French electronics retailer Fnac for the future by orchestrating its merger with the household appliance retailer company Darty, was recruited by Carrefour to steer the group more surely into online territory. That task has become more pressing following Amazon’s $1.37 billion takeover of Whole Foods.

Amazon last week sent shudders throughout the grocery industry, already unsettled by the internet giant’s move into their territory, by announcing plans to lower prices.

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