LINGERING DOUBTS
Pressure grows on new CEO to reboot
South Korea’s central bank left a key rate alone at a record low, citing ‘a considerable amount of uncertainty’.
GENEVA/PARIS: Carrefour SA shares fell the most on record yesterday after France’s biggest retailer warned that the second half of the year would be as tough as the first, giving new chief executive officer Alexandre Bompard an even bigger challenge to turn around the company.
The surprise warning and a share-price plunge of as much as 15% mean Bompard has his work cut out in rejuvenating Carrefour’s sprawling hypermarkets, which sell everything from food to garden furniture but are struggling with price competition and inroads by online retailers.
The 44-year-old took over as CEO from Georges Plassat in July, joining the company from French media and electronics retailer Fnac Darty SA.
“Carrefour France has lost touch with what consumers really want,” Sanford C. Bernstein analyst Bruno Monteyne said in a note.
At Fnac, Bompard gained a reputation for his digital expertise as he steered the company into e-commerce.
The shares more than tripled under his watch as Bompard launched new services for online ticketing and video streaming as well as spearheading a merger of electronics and media retailers.
Those skills are sorely needed at Carrefour, which has struggled to develop its online offering as Amazon.com Inc and other digital specialists make inroads.
Before Bompard’s arrival, the French company acquired several online retailers, including organic food provider Greenweez and technology and homegoods marketplace Rue du Commerce.
Still, Carrefour’s supermarkets have lost their leading position in the domestic market to Leclerc, whose 21.1% share in the July 10 to Aug 6 period topped Carrefour’s 20.3%, according to researcher Kantar Worldpanel.
“We expect the company to undergo a major transformation under Mr Bompard’s lead,” Raymond James analysts Cedric Lecasble and Anthony Guglielmo said in a note, adding that they foresee a focus on overhauling the company’s nonfood operations. “In the meanwhile, we anticipate negative earnings momentum to continue.”
Carrefour chief financial officer Pierre-Jean Sivignon warned that fullyear operating profit would decline a similar amount as the 12% drop in the first half, speaking on a call with analysts late Wednesday.
The decline in earnings was a surprise because Carrefour previously reported second-quarter sales that beat estimates as its French supermarket business was boosted by sunny weather.
Higher volumes in food failed to offset the effects of price competition, and the operating margin in France, which accounts for nearly half of the company’s sales, fell 70 basis points.
Recurring operating income fell 12% at constant exchange rates to €621 million ($740 million), the Paris-based retailer said in a statement on Wednesday. Analysts had predicted €674.6 million.
“Our industry was highly competitive and promotional and clearly this is having an impact on our profitability,” Sivignon said on a call.
In an effort to shore up profitability by reining in costs, Carrefour cut its forecast for investment to a range of €2.2 billion to €2.3 billion from a previous estimate of €2.4 billion.
Carrefour shares were trading at €16.68 as of 10.30 a.m. in Paris, cutting the market value to €12.9 billion ($15.3 billion).