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May 5, 2011

FRANCE: Carrefour France chief McCann exits, defers property IPO

French retail giant Carrefour announced today (5 May) that the head of its core domestic business will leave the group.

French retail giant Carrefour announced today (5 May) that the head of its core domestic business will leave the group.

After only 14 months in charge of Carrefour’s French unit, former Tesco executive James McCann will exit the company, Carrefour said.

Carrefour added that CEO Lars Olofsson will take over the operational management of its French business pending the appointment of a successor.

The company indicated that the executive team of Carrefour France will work under Olofsson’s direct supervision to “accelerate the improvement of Carrefour’s performance in France” and to continue implementing the group’s transformation plan.

Carrefour added that it will delay its controversial proposal to list 25% of its Carrefour Property business, although it confirmed that it will push ahead with the spin-off of its Dia discount chain.

The news of McCann’s departure has raised concerns among analysts that Carrefour’s French turnaround is failing to gain traction.

“Neither of these developments is positive in our view and once again brings into question management’s strategy and ability to ‘flawlessly execute’ its turnaround plan,” Espirito Santo analysts wrote in a research note.

According to Bernstein analyst Christopher Hogbin, McCann’s departure suggests that Carrefour could be struggling to effectively manage its margins in France, where margin progression is reliant on cost reduction and operational improvement.

Meanwhile, the roll out of the retailer’s Carrefour Planet format – upon which much of the French turnaround plan has been staked – appears to be stalling. The company recently reported that sales uplifts in the trial stores have drifted down, with only four of the six trial stores opened showing positive up-lifts. The company still plans to convert 500 further stores to the Planet format in the second quarter.

Significantly, Hogbin suggests that the decision for Olofsson to oversee Carrefour’s French business highlights a weakness in Carrefour’s talent base. “Although there is some rationale to taking time to fill senior spots, the decision of CEO Olofsson (who is not a career retailer) to take over operational management perhaps points to a lack of strong internal candidates,” he warned in a note in investors.

Shares in Carrefour dipped 2.34% to EUR30.88 at 11.30 BST today.

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