You can take your pick of French apothegms: “Plus ça change, plus c’est la même
chose,” or, more succinctly: “Déjà vu.” Either way, industry analysts casting their
critical eye over Carrefour‘s latest strategic revamp could be forgiven for thinking
they’ve been here before.

First of all, the reasons for the rethink are clear. A first-half underlying net profit of
EUR153m (US$217.3m) – down by nearly half on last year – led to an expected full-year profit warning. The detail is arguably even more depressing: operating profit down 40% in France, falling 33% in Western Europe and rising 20% in growth markets – which, in a highly symbolic move, have overtaken the company’s home market in terms of profitability. More on France later.

Over two years into Lars Olofsson’s tenure as CEO, it may be time to question the
ongoing patience of key investors like Bernard Arnault, the LVMH billionaire whose
Blue Capital tie-in with Colony Capital holds 20% of Carrefour’s voting rights.

With Arnault and others reportedly impatient to see real return on their investment
in the company, Carrefour’s decision to spin off discount chain DIA, as well as 25%
of its property division (now delayed) may be regarded as a short-term sop while
executives tackle the long-term problems of turning around the company.

Along the way, there have been unwanted distractions – the reported resignation
of the company’s vice-chairman over the Dia sell-off, and the on-off merging of
Carrefour’s Brazilian operations with CBD, a plan torpedoed for the moment at least
by the strong opposition of French rival (and CBD shareholder) Casino.

In May this year, former Tesco man James McCann quit his leadership post at
CARREFOUR FRANCE just 14 months in, leaving Olofsson to take over operational
responsibility, a position he has maintained despite the appointment of company
veteran Noël Prioux to mastermind Carrefour’s turnaround strategy in the hugely
competitive French market.

But analysts don’t care too much about distractions – they’re far more apt to
concentrate on performance and what the company is going to do about it. What’s
more, they’re beginning to show a little impatience with the regularity of Carrefour’s
strategic changes of direction.

Oh, they do like a plan at Carrefour. First of all, six months after Olofsson took over
at the top, there was the “Transformation Plan”, which envisaged EUR4.5bn of cost
savings. Then, in July this year, we had the “Action Plan”, essentially an update
to the execution of its predecessor, with a focus on the roll-out of Carrefour’s new
hypermarket concept, Planet. And finally, now, there’s the “New Game Plan”.

Accepting the fact that the company’s most serious challenges remain at home,
this last strategy focuses squarely on France, with Prioux identifying three key
headings: Adjust: improving store execution and reducing out-of-stock levels (for
food, up to 7% recently); Rebuild: a shift away from the company’s frankly disastrous promotional strategy in favour of regular low pricing; and Accelerate: aiming to increase own-label products’ share of sales from 25% to 40%, enhancing profitability.

All very sensible, say the analysts. But there’s a problem: in an investor note, RBS
observes that the plan “does not seem overly different” from its predecessors, while
Sanford Bernstein’s Christopher Hogbin says: “While Carrefour’s ‘reset’ action
plan seems fairly sensible, it also seems fairly similar to the plan outlined in June
2009 which, inter alia, called for Carrefour to ‘be a price image leader … improve
our competitive price positioning … optimise the investment mix between everyday
prices, promotions and loyalty’, as well as for increases in private-label range.”

As such, the question is not so much: “Is the plan right?” but much more: “Why
hasn’t Carrefour already done it?”

Part of the answer, Olofsson might counter, lies in the roll-out of its Planet concept,
essentially a means of reversing declines in the company’s French hypermarket
business and one that has shown encouraging performance to date.

If there is one vital operational strand to the company’s current strategy in France,
it is this. In a note, JP Morgan Cazenove is bullish about the story so far, pointing to
double-digit sales uplift at the four “model” stores, which have also taken a decent
chunk of market share.

Even here, however, there are concerns. Four stores is an extremely small sample
size, and Carrefour was clearly too aggressive in its initial roll-out plans, announcing
delays which will see 16 fewer stores remodelled this year, and almost 10% fewer by the end of 2013.

And moving beyond Planet, Hogbin has broader concerns about how Carrefour’s
pricing plans will play in what he calls a “structurally challenging market”, with a
high proportion of private and co-operative businesses happy to chase volumes over
short-term margin. Can Carrefour vie with the aggressive approach of the likes of
E.Leclerc and Intemarché in this respect? And if it tries to do so amid rising commodity prices and a weak consumer environment, what will that do to profitability?

Perhaps the most positive analyst reaction has come in response to Carrefour’s
admission that long-term gain can only come to the company after it has suffered
short-term pain (which could last as long as another two years).

For Hogbin, the profit warning and consequent fall in analyst consensus forecasts
amounts to “a welcome dose of realism” from Carrefour’s management – a focus on
the longer-term fortunes of the business (albeit one that could be put under threat by influential and impatient investors such as Arnault).

But it isn’t just the investors who are growing increasingly impatient. The recognition that “we have been here before” implies a failure on the part of Olofsson’s regime to put these ideas into practice, and raises the issue of how much longer he will have to turn things around.

“The key question is whether management can now deliver,” asserts Hogbin, adding
that he remains “somewhat sceptical”. JP Morgan Cazenove agrees. “A lot of talk
has delivered numerous new strategies,” it says. “We assume management now know they need to deliver.”

In other words, the market has had enough of plans and strategies; now it is
demanding action.