Carrefour could be preparing for a major restructuring of its operations in fiscal 2009 in order to address its lacklustre sales and profits growth, industry watchers have suggested.
In a trading update this morning (12 March), Europe’s largest retailer posted operating profit of EUR3.3bn (US$4.21bn), up 0.3% from EUR3.29bn for the previous year.
However, net profit for the 12-month period plunged 45% to EUR1.27bn, down from EUR2.3bn. The company said one-time items dented net profits, including tax and impairment charges.
According to an investor note from Credit Suisse analyst Xavier Le Mene, these charges suggest “possible restructuring to come soon”.
“While we were not expecting a full strategic overview from the new CEO, the press release stated cost savings and commitment to price. This is a positive to us,” Mene wrote.
In an attempt to boost sales, Carrefour said it will invest EUR600m in fiscal 2009. The company plans to open new stores, particularly in South American and Asian high growth countries. To jump-start sales in developed markets, especially France, Carrefour said it would invest in promotional activity to improve its pricing image.
The group also aims to make cost savings of EUR500m and will limit capital expenditure to EUR2.5bn in 2009.
Following the trading announcement, Carrefour shares were up 1.93% at 11:23 (GMT) this morning, rising to EUR25.15.
However, there were some clouds on the horizon, one Paris-based analyst told just-food.
“Operating profit came in below expectations. Given the current trading environment and the prospect that consumer sentiment is on a downward trend, this is a concern,” the analyst said.
“Sales growth is lagging behind its peers and, while they are moving to address this, in an environment where price positioning is becoming ever more important, margins may be sacrificed. The question becomes, can cost savings cover the level of investment needed?”