Carrefour shrinks to boost value in revival plan

For Carrefour SA Chief Executive Officer Georges Plassat, smaller means more valuable. Since Plassat, 63, took over as CEO last May, the French retailer has dispensed with assets in Colombia, Malaysia, Indonesia, Singapore and Greece, moves that have helped add about 5 billion euros ($6.5 billion) to the company's market value. He may not be done there.

Though Plassat has said the asset sales are over, he might yet sell off underperforming operations in Turkey, Poland and Italy, Main First Bank predicts. Carrefour, which analysts expect to report a fifth straight decline in annual earnings tomorrow, may also downsize some hypermarkets in France, according to Deutsche Bank AG.

Following a path similar to that taken by European peers such as Tesco Plc (TSCO) and Metro AG (MEO), the CEO is forsaking international ambition to focus on boosting domestic sales that have barely grown in the past decade. Under Plassat, Carrefour has sold operations with sales of 5.2 billion euros, Deutsche Bank estimates.

"Carrefour has become a lot more hungry for cash to reinvest in its core European markets," said Bryan Roberts, an analyst at Kantar Retail in London. "The more resources that can be freed up to fix France, the better."

John Kershaw, an analyst at Exane BNP Paribas in London, estimates that the company may have to invest more than 2 billion euros to revive the business, whose domestic stores have been losing market share to rivals LeClerc and Intermarche. To win back shoppers, Plassat has pledged to give more control to store managers and reduce food prices, while adding more non- branded goods and pick-up points for online orders.

The company's stock has risen 47 percent since Plassat's arrival, partially offsetting a 71 percent decline in the preceding five years. The share of analysts with a buy rating on the stock has risen to 44 percent from 13 percent in that time, while the proportion with a sell recommendation has declined to 23 percent from 50pc.