Carrefour shareholder Knight Vinke Asset Management has urged the French retail giant, which last week issued its latest profit warning, to appoint an independent chairman.
The world’s second-largest retailer said last week that its annual operating income could fall by 15-20% this year. The announcement was the latest indication of Carrefour’s problems, particularly in France, where its sales are falling.
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In an open letter to Carrefour’s board, shareholders and employees, Knight Vinke CEO Eric Knight said the investment fund, which owns 1.5% in the retailer, “cannot stand by and watch without reacting” to the retailer’s performance in 2011.
Mr Knight said Carrefour had issued five profit warnings in the last year and had seen its share price fall by almost 50%.
He said Carrefour’s “very poor performance” could be due to “several factors”, including “over-centralised store management”, IT problems and a perception in the market that the retailer’s prices were not the lowest. He also pointed to a “worrying series” of management changes “and, above all, serious governance issues”.
Carrefour CEO Lars Olofsson took on the role of chairman in June. Mr Knight said Olofsson could not form a judgment on the performance of the retailer’s programme to rebrand its hypermarkets as Carrefour Planet stores.
The Planet initiative is “one of the most ambitious transformation programmes ever undertaken in retailing”, Mr Knight said and he questioned both the aim of the project and the way it was being run by Carrefour.
Olofsson, Mr Knight argued, “is both supervisor and supervisee, at least as far as Planet is concerned”. He added: “As chairman, [Olofsson] is required to form a judgment on the performance of the project – either good or bad – whilst being at the same time the project’s initiator and the person responsible for its implementation. This situation is far from being ideal and we call on the board to appoint an independent chairman as soon as possible.”
The Knight Vinke chief also commented on the position of CEO and said he would not recommend Carrefour appointing an “outsider” to fill this position. Olofsson joined Carrefour as chief executive in 2009 from Nestle.
“The company’s management has within its ranks a number of highly experienced professionals with a real understanding of retailing, both in France and abroad,” Mr Knight said.
He added that Carrefour could have two CEOs given the “complexity and size of the group”.
“The board could perhaps consider a twin-headed solution – with a CEO for the emerging markets and a CEO for France and its neighboring countries. The two positions require very different skills and each requires a true full time commitment. The group would also benefit in terms of reduced complexity and increased efficiency,” he said.
When contacted by just-food, Carrefour declined to comment.
