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March 9, 2012

Carrefour full-year results – what the analysts say

Europe's largest retailer Carrefour reported a 14% fall in annual profits and said it would cut spending capex this year.

Europe’s largest retailer Carrefour reported a 14% fall in annual profits and said it would cut spending capex this year. Here is a flavour of what leading retail analysts said about Carrefour’s recent performance.

“Despite reporting overall sales growth, driven by its buoyant emerging market operations, there is no denying that the group’s overall performance has been brought down by its exposure to the underlying weakness of its core European market. Efforts to improve its hyper division have been hampered by the severely challenging macroeconomic conditions in the eurozone, which has led to a significant deterioration in non-food sales, especially in the second half of last year” – Conlumino analyst Neil Saunders

“Increasingly, we continue to believe that investors should focus on cash flows, and Carrefour’s are compromised, we believe, as has been shown by a radically reduced dividend and capex forecast. In our opinion, the reality for Carrefour is its pricing position remains wayward vs. the established market leaders, a profit risk that they will try to offset with EUR400m of cost savings. Its format exposure is once again being questioned and its returns remain sub par. In our view, Carrefour will likely take many years to turn around, require significant price investment and therefore we envisage a further period of earnings pressure and shareholder value destruction” – Matthew Truman, European food retail analyst, JP Morgan Cazenove

“Management has announced that the results from [hypermarket chain] Carrefour Planet are lower than expected and as a result the programme will be scaled back and put on hold. Most investors had already come to the conclusion that the results from Planet were weak. Although this was Lars Olofsson’s project, Planet was meant to be the solution to Carrefour’s woes in Europe; confirmation that this is not the case means that we are back to square one, again. We now await a strategy update from incoming CEO Georges Plassat, but this is unlikely to be forthcoming until the second half of the year” – Caroline Gulliver, analyst for Espirito Santo

“FY 2011 is in line with consensus expectations. However, the quality of the earnings was low (large amount of non recurring items), and more importantly, the dividend was cut very significantly (down 52% vs. last year and circa 35% below consensus expectations). With the stock trading yesterday on a PE of 12.2x 2012 earnings, we believe the share price should remain under pressure” – Edouard Aubin, Morgan Stanley analyst

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