For Carrefour watchers, these are uncertain times.
At first glance, the French retail giant’s second-quarter and half-year sales figures, published yesterday (15 July), give rise for some optimism.
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The group’s consolidated sales grew faster in the second quarter, meaning Carrefour’s turnover was up 5.9% to EUR48.88bn (US$63.42bn).
The world’s second-largest retailer also outlined a robust forecast for half-year and full-year profits.
Carrefour said it expects its “activity contribution” – or operating profit – to stand at EUR1.1bn for the first half of 2010 and at EUR3.1bn for the full year.
Those targets compare to the EUR1.01bn and EUR2.8bn booked for the first half and full year of 2009.
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By GlobalDataAlongside the results, Carrefour, despite spending recent months working on challenges in its domestic market and restructuring operations elsewhere, showed it still has an eye on expansion, with the announcement of an acquisition of a majority stake in Chinese hypermarket operator Baolongcang.
The Chinese firm only has 11 stores but the deal demonstrated Carrefour’s commitment to China at a time when so many questions are being asked about its future in other Asian markets.
Nonetheless, study the numbers more closely and it is clear that Carrefour’s work at restructuring the business remains very much a work in progress.
Sure, the retailer’s top line grew faster in the second quarter of 2010 but there were boosts from expansion, foreign exchange and fuel. Carrefour’s like-for-like sales, excluding fuel, were down 1.1%.
The retailer claimed some progress in France, pointing to a 1.8% increase in like-for-like sales, excluding fuel, from its Carrefour Market banner.
It also cited “improved sales” from its French hypermarket business, which has long been a drag on its domestic operations.
However, elsewhere in Europe, Carrefour still faces challenges. Its second-quarter like-for-like sales in Spain were down 5.5%, excluding fuel, due to food deflation and the overall tumultuous economic conditions.
The recent battle with unions in Belgium has taken its toll on the business in that market, where like-for-like sales fell 8.6%.
During the quarter, Carrefour secured union backing for its restructuring plans in Belgium but the retailer still faces fierce competition from low-price retailers like Colruyt.
Like-for-like sales in Latin America slowed during the second quarter, notably in Carrefour’s key market in the region, Brazil. Again, local competition remains fierce, not least from Brazilian retailer CBD, which this week posted double-digit growth in same-store net sales – against Carrefour’s 2.9% growth.
Like-for-like sales growth in China did accelerate but the continuing mixed performance was perhaps reflected in the movement of Carrefour’s share price today, which rose in early trading but was down 0.6% at EUR35.12 at 12:17 CET.
Above all, Carrefour’s much-heralded transformation programme remains a work in progress. Christopher Hogbin, senior retail analyst at Sanford Bernstein, said Carrefour’s “reassuring guidance” on profits suggested that “cost cuts are occurring and that Carrefour is able to retain some of the benefit”.
However, he added that Carrefour’s sales numbers showed “little evidence” that the programme was “helping sales performance”.
Much to ponder, then, for Carrefour watchers and the retailer’s management.
