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July 1, 2009

FRANCE: Carrefour transformation targets savings, turnaround

Carrefour has indicated that it expects to cut EUR4.5bn (US$6.4bn) in costs out of its business over the next three years, as part of a company-wide restructuring plan at the French retail giant.

Carrefour has indicated that it expects to cut EUR4.5bn (US$6.4bn) in costs out of its business over the next three years, as part of a company-wide restructuring plan at the French retail giant. 


Speaking to analysts yesterday (29 June) in his first presentation since becoming CEO six months ago, Lars Olofsson said Carrefour would look to transform the way it does business while also working towards its target of becoming the “preferred retailer” of consumers in its core markets.


“[Cost savings are] based out of five different levers – here we’re going to talk about how can we improve the way we are working in the stores, how can we improve out supply chain, how can we improve our overheads, the SGNAs, and, in the end, also the purchasing,” he said.


Olofsson said the group would reduce operating costs by EUR2.1bn by 2012 and, by cutting inventory times by a week, Carrefour plans to save a further EUR1.4bn.


By centralising the buying activities of its four main European markets – France, Spain, Italy and Belgium – and sourcing non-food items at a global level, the company expects to generate procurement savings of EUR1bn, Olofsson added.


The company will increase its focus on core markets in western Europe, with particular emphasis on its home market.


Carrefour has witnessed its market share and sales decline in France, particularly at its hypermarket business.


“We know we have a problem in the hypermarkets, we just have to solve it. The hypermarkets are not dead. Sales are still holding up,” Oloffson insisted.


Carrefour said it would have proposals for how to address the problems in its hypermarket business by the end of this year, ready to test in 2010.


Over the next three years, the company will also look to turn around the fortunes of its Ed discount formats.


Olofsson said that Carrefour intends to refurbish its Ed stores, working from the company’s Dia model in Spain. The company plans to have 20 Dia stores in France by the end of the year.


The transformation plan will require total capital expenditure of EUR500m and entail one-off expenses of about EUR1bn over the three-year period. 

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