UPDATE: FRANCE: Carrefour CEO promises range review
Plassat's plans include "rationalisation" of product range
Carrefour CEO Georges Plassat has outlined plans for a wide-ranging review of the products in its stores as part of its programme to revitalise the world's second-largest retailer.
Plassat, speaking after the French retail giant reported half-year results that included better-than-expected profits, said Carrefour would look to "rationalise" its range. Leading brands, he said, would be "at the forefront" of Carrefour's offer.
"We should rationalise our offering and foreground the major products and there of course prices are not negotiable. We don't have the resources on our own to become the leader for consumers," he said.
The Carrefour chief, who joined the company in May, questioned the retailer's strategies on own label and on entry-price products.
He called a target of generating 40% of sales through own label "vain" and said Carrefour would look again at what it wanted to achieve with its private-label range.
"The own brand, the distributor's brand, had a goal, 40% of our turnover. That's a vain objective. If you put the retailer's own brand at its proper level, look at the volumes that would be needed to generate the margins that would be necessary to keep things going in a sustainable way. It's totally vain. We need to refocus the goals of our own brand," Plassat said.
An analysis of Carrefour's entry-level own-label products would also be part of the review, he indicated. In 2009, the retailer launched a cut-price Carrefour discount range. However, Plassat argued putting the Carrefour name on entry-level products could confuse consumers.
"We also need to look at our entry-price range. When we compare ourselves with our competitors, we have two times as many entry-level products assigned Carrefour as our competitors. We need to focus on what is essential," he said. "The risk is we create confusion. When we have to explain why we have the Carrefour product as an entry-price product, it becomes rather difficult. Carrefour has its own product and it brings down the quality to create Carrefour Discount. This is difficult to explain. How did we explain this in the past? We said we were number one."
Plassat's comments came as he outlined initial ideas to revive a retailer that has seen sales, particularly in markets like France, Spain and Italy, suffer in recent years. He believes it will take three years to turn the company around and the market had expected him to provide more detail on how he would revitalise the business.
Cost control will be central to Plassat's plans. The Carrefour chief said the retailer would reduce costs and confirmed speculation this week it would cut 500-600 administrative jobs.
Plassat also indicated Carrefour would reconsider its position in certain markets, including Indonesia and Turkey. "What we have to do is adjust the various areas in which we want to stay strong because we can't spread ourselves too thin," he said.
However, Plassat said Carrefour would look to increase its capital expenditure. He said capex would be EUR1.6bn this year, which he described as "way below the structural needs of a developing retailer".
Nevertheless, he would not provide a specific figure for capital expenditure in the years ahead. In fact, Plassat provided little financial details or targets on his "action plan" for Carrefour. He did not, for example, issue a figure for the amount Carrefour would look to cut costs.
ING analyst John David Roeg said Plassat's initial plans to cut costs and defend key markets were "logical". However, he said it would be difficult to judge if Plassat's plans work without publicly-stated targets.
"The company will provide very little disclosure and no longer any meaningful targets. The jury is out. He has given himself a very long time to improve things and it's difficult to judge his achievements if there are no targets to compare with," he told just-food. "Hopefully they will be a little bit more open when it comes to the full-year results next year but in the meantime it remains a black box."
Shares in Carrefour closed up 6.75% at EUR16.81. During the day, they reached a high of EUR17.67.
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