Blog: Dean BestIt is too early to call Carrefour revival

Dean Best | 12 July 2012

The market seems to believe things could - could - be looking up at Carrefour. Shares in the world's second-largest retailer jumped today (12 July) after it reported better-than-expected second-quarter sales. But let's not call a Carrefour recovery just yet.

On the face of it, Carrefour is still a business that, for its growth in emerging markets, is facing challenges at home and in Europe.

Group sales inched up 0.9% in the first half of the year, thanks to its stores in Latin America and Asia. However, sales in France and in its European markets fell.

Like-for-like sales from its core French hypermarkets remain under pressure, dropping 5.7% in the second quarter of the year.

However, CFO Pierre-Jean Savignon saw signs of recovery from those stores, notably in food. He was careful not to "cry victory" as he put it but the market reacted positively to the results. At the time of writing, Carrefour's shares were up over 7% at EUR14.14.

That said, the retailer has a long way to go to see its shares return to the value they were at a year ago when its stock was at EUR22.45.

Some analysts are still unsure about Carrefour's prospects. Conlumino analyst Simon Chinn said Carrefour's fortunes were linked to the eurozone. "Until there is any clear sign of a real solution to the eurozone's problems, Carrefour's sales will continue to suffer from a severe lack of demand from consumers, who lack the confidence and disposable income to spend in its stores," he said.

In many ways, Chinn is right. Let's face it, it is far too soon to come to any conclusions on Carrefour's prospects. It has had a challenging few years and one quarter does not constitute a recovery. A lot of its challenges remain. It may need to exit or change the way it does business in some markets (as it did recently in Greece) to give it the chance to focus on its more important markets to drive a significant turnaround in its fortunes.

However, today's update may mean investors are slightly less anxious than they have been recently. All eyes now turn to next month's announcement of its half-year profits.


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