Carrefour SA

PARIS — Carrefour SA posted a 0.4 percent rise in third quarter sales as a tough competitive market in France continued to weigh on the group’s performance.

Sales over the quarter were 21.86 billion euros at the world’s second largest retailer after Wal-Mart Stores Inc., as ongoing price wars in France dragged on business at the company’s big box stores and supermarkets.

“Sales in the quarter were strongly impacted by a continued, highly promotional environment,” the company’s new chief financial officer, Matthieu Malige, told a conference call with analysts. The company noted the pressure on prices in France has continued since initially flaring up nearly two years ago, characterizing other markets in Europe like Italy, Belgium and Spain as highly competitive on this front as well.

Sales slipped 0.9 percent on a like-for-like basis in France, with the company also signaling price deflation in fresh produce, which affected supermarkets the most, given the higher proportion of fresh produce sales at smaller stores compared to the larger hypermarkets.

Carrefour is in the process of launching an overhaul under the direction of its new chief executive officer Alexandre Bompard and renewed its pledge to update the markets on its strategy by the end of the year as it confirmed full-year targets.

Carrefour expects annual sales growth of between 2 percent and 4 percent at constant rates and full-year recurring operating income roughly inline with the first half, at current exchange rates.

Bompard, who took the helm of the company this summer, unveiled his new management team last month, bringing in executives from outside the group, including Marie Cheval, an online banking executive charged with the retailer’s digital operations. He hired Malige, a former deputy, earlier this week.

Malige worked alongside Bompard at Fnac Darty, an electronics and household appliance retailer. The executives, who held the same positions at their previous employer as they now do at Carrefour, are seen as breathing life into a business struggling to cope with the shift to online consumption. Central to their strategy was the merging of two companies, bringing Darty’s selection of household appliances and Fnac’s electronics and books business under the same roof, to share physical stores space in addition to logistics.

“The new team, which has been rapidly put in place, is fully mobilized to determine the transformation’s key pillars, to be presented by the end of the year,” said Malige, who declined to elaborate further despite prodding from analysts, noting he has only been in the job for three days.

But highlights of the quarterly report might provide a few hints about areas the company will focus on. Executives noted they are working hard on tackling the stubbornly competitive environment in France with pricing policies they referred to as tactical.

On the positive side, the company singled out improvement in non-food activities at the larger hypermarket stores, highlighting textile products. The company also highlighted organic goods as a strong-performing segment, with high double-digit sales growth over the quarter.

Carrefour disappointed markets in August, warning that it expects many of its markets to remain difficult for the second half of the year as it reported first-half results that were weighed down by the tough French trading conditions. The company’s share price dipped around 11 percent to close at 17.13 euros on Wednesday.

The drag on profitability from price wars has complicated matters for French grocers seeking to adapt their larger stores to better suit quickly evolving consumption habits.

While Carrefour and domestic rivals have focused on bolstering their networks of smaller and more convenient stores as they cater to consumers increasingly pressed for time, they continue to seek ways to improve business at their vast networks of big box stores.

While French retailers scramble to find new ways to draw in customers and improve efficiency online, however, international heavyweights Amazon and Alibaba continue to push into the country. Amazon inaugurated its sixth distribution center in France earlier this month, saying it created 1,500 new jobs in the country this year and expects to reach 5,500 employees by the end of the year.

Carrefour said quarterly sales in Latin America rose 4.4 percent on a like-for-like basis, with strong growth in non-food sales in Brazil. Food deflation was an important factor affecting business, the company said, pointing to inflation in the high double digits a year ago compared to this quarters mid-single digit deflation levels.

“We expect the deflationary trend to have bottomed out and food prices to start increasing” in the fourth quarter, Malige explained.

Business in China was also affected by food price deflation, including for products such as pork, an important seller in the country. Sales in Asia were down 3 percent, on a like-for-like basis, over the quarter, with the company flagging improvement in China. The company opened five convenient stores in the country over the quarter and expects to reach 60 by the end of the year.

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