Carrefour has unveiled ambitious sales targets on the back of its plans to invest EUR1.5bn (US$1.97bn) in rolling out its new Carrefour Planet hypermarket concept in France, Spain, Italy, Belgium and Greece.
The world’s second largest grocery retailer believes the new concept will yield an estimated incremental sales growth of 18% over the 2010-2015 period. Including all of the other initiatives the retailer is currently undertaking, it expects sales to increase by 51% by 2015 against 2009 levels to reach EUR120bn in 2015.
Speaking yesterday (17 September) on the investor website Cantos, Carrefour CEO Lars Olofsson said Carrefour is moving away from the “everything under one roof” philosophy to become a specialist in nine areas.
The food offer will be split into three areas, fresh food, frozen food and an organic section. Outlets will also sell home, fashion, baby, beauty, electronics and wine categories, but Olofsson is particularly banking on the stores’ “enriched” concept. “We have a chef in the store, we have a sushi bar in the store as well. And you can also try the latest technology. You can even visit a hair stylist or get advice on your make-up. And if you prefer to go shopping without your kids, we have a nursery that takes care of your kids while you do your shopping.”
Olofsson said he is confident of the success of the format, given the amount of research that has gone into its development. “Carrefour Planet started with interviews and customer data from 50,000 clients. We have had 150 people working on this project now for a year and the result you have seen now in two of the pilots but also the other three that we have opened up in the last couple of months. It is a profound change. All consumer feedback is very, very encouraging,” he says.
Drawing from that customer data, the retailer has created a “lot more comfort in the stores,” says Olofsson, with wider aisles, reducing the height of gondolas so customers can have a “better view of the store and where you can find things”, as well as instore signage to signpost where customers are and better highlight prices.
All in, the Carrefour Planet roll-out will encompass 250 stores, representing half of its European hypermarket estate. However stores that are missing out on the conversion, such as those where the Carrefour boss says “we can’t put in all the services, for instance, or the hypermarket is not big enough to be expressed under the nine major poles that we are putting in,” will still be remodelled using the “best practices” from the Planet stores.
However, he adds that the stores moving to the Carrefour Planet banner represent “more or less 70% of the sales. So you can say the major part is going to be under the Carrefour Planet”.
Bernstein analyst Christopher Hogbin says the early data coming from the trial stores suggest “encouraging early sales uplifts” with approximately 8% like-for-like growth in the Spain and Belgium stores, but 20+% uplifts in various categories in the French pilots.
However, doubts remain among the analyst community over whether Carrefour can deliver on its ambitious plans. Hogbin says questions remain around the format, as “Carrefour needs to pilot the format that will be applied to smaller stores, although Carrefour is confident that the ‘bricks’ for building the smaller stores are in place”.
Additionally, he outlined concerns about the “competitive response” to the format, saying that while “Carrefour expects competitors to respond to the roll out of its “planet” format, but believes that it is protected by its differentiation and consequently that the obvious competitive weapon of price alone will have only limited impact”.
Finally he highlighted the execution risk around implementing the new stores saying “suspicion will likely linger given the poor performance of attempts, admittedly under a different executive team, to improve hypermarkets.”
RBS analyst Justin Scarborough also poured some cold water on the plans, describing the 2015 forecast as “incredible”, adding that he doesn’t think that “setting such targets is particularly sensible.”
However, the markets have reacted positively to the news, with shares surging 4.56% today at 14:22 CEST to EUR39.99.