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Alexandre The Great - Why Bompard Should Be Confident He Can Lift Carrefour: Analysis

By Steve Wynne-Jones
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Alexandre The Great - Why Bompard Should Be Confident He Can Lift Carrefour: Analysis

Some six months on from his appointment as Carrefour chief executive, now is the time for Alexandre Bompard to prove his mettle.

Carrefour has just posted a 1.6% increase in like-for-like sales for full year 2017, which is down from the 3.0% increase it posted in 2016. France, its home market, was up 0.8% on a like-for-like basis, albeit marginally down (-0.1%) at constant currency levels.

In what was a positive turn for the retailer, fourth quarter sales were up 1.9%, which was an improvement on the 0.5% increase the retailer posted in the third quarter, and an indication that 'Bompard effect' might now be kicking into gear.

Analyst Appraisal

Analysts have broadly welcomed Carrefour's performance.

Barclays European Food Retail Equity Research said that "Carrefour’s 4Q sales came as a relief after its particularly weak 3Q numbers. Although the group continued to lose market share in France during the period, LFL sales ex. fuel/ex. calendar returned to positive territory at both its hypermarkets and supermarkets (+0.7% and +1.0%, respectively)."

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Elsewhere, Bruno Monteyne of Bernstein Research noted that while Carrefour's full year operating profit of €2 billion was below analyst consensus and "3.4% below the guidance given at H1", its France like-for-likes are a positive note: "Driven by beat in both hypers, LfL growth of +0.7% compared to consensus of 0.0%, and supermarkets, LfL growth of +1.0% compared to consensus of -0.5%."

All eyes will now be focused on net Tuesday, 23 January, when Bompard is set to reveal his 'transformation plan' for the business, with speculation already rife as to what parts of the business look set for an uplift, and which may be divested.

French paper Le Figaro reported this morning, for example, that Carrefour had sought to offload its Chinese operations to Auchan and Alibaba last November, a claim the retailer has denied.

Other news reports have suggested that the retailer is looking into ways to divest its operations in Argentina and Poland; rumours that Carrefour is yet to corroborate.

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There have also been suggestions that Bompard will be keen to introduce significant price cuts at the group's hypermarkets, however Barclays suggests that the CEOs experience at his previous employer, Fnac Darty, means that he is unlikely to dive headlong into a deep promotional strategy.

"As a former CEO of Fnac, Alexandre Bompard is well placed to understand that cutting prices is an expensive and uncertain strategy (we note that Fnac’s resilient performance against Amazon is not primarily price-driven). [...] In this context, we believe that Carrefour’s new commercial strategy will include tactical price cuts and the launch of a new and more efficient loyalty programme enabling personalized promotions"

European Focus

One thing is for certain; Bompard will seek to implement some of the improvement measures from its domestic market into its other European operations.

While the group's French business posted fourth-quarter like-for-like sales of +1.5% (partly boosted by the high profile 'Carrefour Anniversary' campaign), its Europe operation as a whole was up by just 0.4%, with several key regions disappointing.

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Carrefour Spain, for example, posted a like-for-like sales decline of 0.6%, with Carrefour citing 'continued competitive pressures' in the Spanish market. Italy was worse again, posting a 1.1% like-for-like sales decline; although its ongoing store remodelling programme did have an impact here.

Last September, the first stages of Bompard's transformation plan was instigated, with the creation of a Group Executive Committee; notably, Eric Uzan, the group's Executive Director for Italy was reappointed as executive director for Southern Europe, which incorporates both Italy and Spain - affirmation, if if were needed that the issues at hand in both markets are somewhat similar.

It is likely that with the creation of the Group Executive Committee, Bompard will look to divest a certain degree decision making responsibilities to regional operations, in much the same way that Olaf Koch did at Metro previously.

However, the former Fnac Darty chief knows that while he might have a good team around him, it will be his head on the block if Carrefour doesn't arrest some of its structural issues and get back on a growth trajectory.

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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