Carrefour, Europe’s largest retailer, reported after the close of trading yesterday (11 January) that its fourth quarter sales rose 2.8% to EUR23.5bn (US$30.4bn). However, investors responded negatively to the news, with share value sliding 5.11% to EUR44.38 in morning trade.
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The group said that fourth quarter sales were hit by a decline in consumer confidence in Europe, a “non-typical month of October” which saw like-for-like sales drop by 4.9% in Europe, a negative calendar effect estimated at –2%, a decrease in petrol sales and a –1% currency conversion.
“Even if we consider October an odd one-off and ignore it, the implied performance in November and December was still poor,” JPMorgan analyst Jaime Vazquez wrote in an investor note. Moreover, Vazquez added, Carrefour failed to identify all areas of weakness, focusing on external rather than internal factors. “The company seems to only blame external factors. Lack of response to competitive pricing and its own non-food weaknesses should also be highlighted,” he wrote.
Total sales at stores open a year or more dropped by 1.5%, the company reported. Revenue at stores open more than a year fell by 2.3% in France and dropped by 2% in the rest of Europe. The only region to report like-for-like sales growth was Latin America, where sales increased by 6.8%, while like-for-like sales in Asia fell 2.4%.
Total sales in the French retailer’s home market rose by only 0.8%, lagging behind expectations. Elsewhere, store expansion drove gains with Asian sales growing by a total of 9.7%, Latin American sales increasing by 6.3% while European sales, excluding France, were up by 3.7% in the fourth quarter.
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By GlobalDataIn order to win back lost market share in France, Carrefour’s largest market, the supermarket group has embarked on an aggressive programme of price cuts, putting pressure on sales margins. However, the group said that it did succeed in winning back 0.5% of the French retail market in 2006.
