Carrefour confident of turnaround after first-half profit rise

Carrefour CEO Alexandre Bompard on Thursday expressed confidence in his turnaround strategy after Europe’s largest retailer posted a stronger-than-expected 5.8 percent rise in first-half operating profits.

The performance reflected cost savings of 520 million euros and robust sales in Brazil, which helped offset weakness in the core French market amid cut-throat competition among supermarket retailers.

“The first half was a major step forward and a sign Carrefour has changed. Our execution was well in-line with our targets,” said Bompard as he marked his first year at the helm.

Cost savings would accelerate in the second half when the first gains tied to job cuts in France would kick in, he said.

“The fast start of the Carrefour 2022 plan reinforces our confidence in Carrefour’s ability to transform itself rapidly and in depth. We confirm the targets we have set ourselves for 2020 and 2022,” he added.

In January, Bompard announced a five-year overhaul plan to cut costs and jobs, boost E-commerce investment and seek a partnership in China with tech giant Tencent in an effort to lift profits and sales and tackle the growing competition from U.S. online retail giant Amazon.

Carrefour is also expanding into convenience stores to reduce its reliance on big hypermarkets, focusing more on organic products and private-labels, having recently sealed a purchasing alliance with British rival Tesco.

First-half recurring operating profit reached 597 million euros ($696 million), above the average 523 million forecast in a poll of analysts conducted by Inquiry Financial for Reuters.

In France however, where Bompard has made reviving flagging sales at hypermarket stores a priority, operating profit sank 44.8 percent to 110 million euros in the first-half.

The “Carrefour 2022” plan has been relatively well received by investors as being the right sort of strategy to prepare the ground for a recovery.

But evidence of an improvement in its business performance has remained elusive, notably in France where Carrefour faces competition from the likes of Amazon and pressure from discounting at rivals such as Leclerc.

In France, where Carrefour makes 47 percent of its sales, hypermarket sales fell by 1 percent year on year in the second quarter against a 2.3 percent decline in the first quarter.

This contrasted with local rival Casino, whose Geant hypermarkets sales in France accelerated to 2.8 percent growth in the second quarter.

Carrefour shares have slumped 36 percent since Bompard became CEO on July 18, 2017.