Carrefour seeks China partnership
Carrefour is to slash jobs, boost e-commerce investment and seek a partnership in China with Tencent in the face of competition from Amazon, sending its shares higher on Tuesday.
Carrefour is to slash jobs, boost e-commerce investment and seek a partnership in China with Tencent in the face of competition from Amazon, sending its shares higher on Tuesday.
Alexandre Bompard, who took over as CEO in July, is trying to overhaul Carrefour’s French hypermarket business as well as expand online retail. Amazon’s purchase of Whole Foods in the US in 2017 has prompted speculation that the tech company could be targeting food retail in Europe next.
Bompard plans to invest €2.8bn in digital commerce by 2022, six times its current investment, as Carrefour plays catch-up in online food retail.
“Carrefour has reached a turning point in its history. We have a huge ambition and I am well aware of the magnitude of this challenge,” Bompard told a news conference.
Under pressure to increase profit, Bompard also announced cost savings of €2bn by 2020, including a voluntary redundancy plan for 2,400 employees at its French head office and plans to sell or close 273 underperforming stores Carrefour bought from Spanish retailer Dia in 2014.
Carrefour’s share price rose about 6%, the biggest one-day gain since October 2015.
“Consumer trends are changing, and Carrefour is adapting accordingly,” said Benoit de Broissia, analyst at Paris-based investment firm Keren Finance, which owns Carrefour shares.
The group, the world’s second-largest retailer with more than 380,000 employees, is targeting €5bn in e-commerce food sales by 2022 — an amount that would be six times greater than at present.
Carrefour’s online sales accounted for just 1.7% of its total French food sales in 2016, while more digital-savvy rival Leclerc managed 8%, according to analysts at brokerage Bernstein.
Carrefour has struggled to reduce its reliance on hypermarkets, particularly in France, where it makes 47% of its sales.
Bompard, previously CEO of electronics retailer Fnac Darty, ruled out closing any of the 247 French hypermarkets, proposing instead to reduce selling space where relevant and to transfer five hypermarkets to lease management contracts.
In China, Carrefour remains loss-making amid fierce competition from local players and a buoyant online market. A partnership between rival French retailer Auchan and Alibaba has also increased the pressure on Carrefour’s China business.
In response, Bompard announced a potential deal with Tencent and local retailer Yonghui to take a stake in Carrefour China.
Bompard’s plan to shed 2,400 jobs could set him on a collision course with France’s trade unions including Force Ouvriere, which has called for a walkout on February 8.
Carrefour is the largest private sector employer in France.
“This is a plan destined to please shareholders. We remain vigilant and still fear as many as 4,500 jobs could go,” said Force Ouvriere secretary-general Dejan Terglav.
French Minister of Economy Bruno Le Maire also said the government would be “very vigilant” on the group’s proposed staff cuts.
BOMPARD’S PLAN TO SHED 2,400 JOBS COULD SET HIM ON A COLLISION COURSE WITH FRANCE’S TRADE UNIONS