Carrefour: France Gains Point To Turnaround?

France based retailer Carrefour's H1 results point to further gains made by the firm in its bid to turn around turbulent losses which saw its share price plummet in 2011. With CEO Georges Plassat's leadership continuing to e ffect meaningful progress, significant improvements across the retailer's domestic operations reflect our long-term view that France must remain at the core of the retailer's strategy in the pursuit of long-term, stable growth.

Despite French net sales slip ping by 0.3% year-on-year, a key takeaway from H1 results is a 75.4% leap in operating profit in France, rising to EUR482mn. Net income also rose to EUR902mn (compared with the EUR3mn recorded in H112) with the company's bottom line boosted by lower losses fr om disposed assets abroad; both impressive indicators pointing to the retailer's continued recovery. Wider Europe an operations, however , continue to look problematic as sales slid 4.5%, with poor regional consumer sentiment particularly evident in Italy and Spain. Although improvements in France are certainly encouraging, we don't expect the challenges presented Europewide to lift in the near term, potentially threatening the retailer's progress in H1.

Conversely, international operations continue to look strong for the world's second largest retailer. With the dumping of assets in markets such as Colombia, Indonesia and most recently, in the Middle East (with joint venture partner Majid Al Futtaim (MAF) ) , growth here presents a stark contrast with developed market operations. Up 13.3% compared to H112, Latin America looks particularly strong and is likely to continue to prove a lucrative addition to the retailer's profile moving forward. And although Carrefour has been actively committed to cut ting presence in markets it was unsuccessful in , international operations continue to be an important facet of future growth for the retailer.

Progress Evident
Carrefour Daily Share Price (EUR)

Carrefour: France Gains Point To Turnaround?

France based retailer Carrefour's H1 results point to further gains made by the firm in its bid to turn around turbulent losses which saw its share price plummet in 2011. With CEO Georges Plassat's leadership continuing to e ffect meaningful progress, significant improvements across the retailer's domestic operations reflect our long-term view that France must remain at the core of the retailer's strategy in the pursuit of long-term, stable growth.

Progress Evident
Carrefour Daily Share Price (EUR)

Despite French net sales slip ping by 0.3% year-on-year, a key takeaway from H1 results is a 75.4% leap in operating profit in France, rising to EUR482mn. Net income also rose to EUR902mn (compared with the EUR3mn recorded in H112) with the company's bottom line boosted by lower losses fr om disposed assets abroad; both impressive indicators pointing to the retailer's continued recovery. Wider Europe an operations, however , continue to look problematic as sales slid 4.5%, with poor regional consumer sentiment particularly evident in Italy and Spain. Although improvements in France are certainly encouraging, we don't expect the challenges presented Europewide to lift in the near term, potentially threatening the retailer's progress in H1.

Conversely, international operations continue to look strong for the world's second largest retailer. With the dumping of assets in markets such as Colombia, Indonesia and most recently, in the Middle East (with joint venture partner Majid Al Futtaim (MAF) ) , growth here presents a stark contrast with developed market operations. Up 13.3% compared to H112, Latin America looks particularly strong and is likely to continue to prove a lucrative addition to the retailer's profile moving forward. And although Carrefour has been actively committed to cut ting presence in markets it was unsuccessful in , international operations continue to be an important facet of future growth for the retailer.

France Remains Focus
Carrefour Revenue Breakdown By Geography - FY2012

However, despite the ongoing importance of international operations, it is vital to reiterate the prominence of France in securing future growth. In BMI 's view, one that we have held for some time, France will remain at the core of Carrefour's growth strategy moving forward. Representing 46% of sales, the retailer's domestic market has demonstrated that recovery is achievable despite a decline in hypermarket growth a nd subdued consumer confidence affecting the domestic market.

Heading into the latter half of 2013, focus on cost savings, management changes and store innovations will continue to push growth in France. According to our forecast figures, France's grocery retail sector is forecast to see fastest growth in the discount segment, rising 36% in local currency terms between 2012 and 2017; highlighting the importance of discount options for consumers and the need for industry leaders such as Carrefour to increasingly cater for reduced consumer budgets. However, although improvements for the retailer's domestic market are encouraging and there remains room for promising growth beyond the hypermarket segment, it must be cautioned that Carrefour still has considerable work to do. Global sales will remain an important driver of revenue and will take careful balancing to complement domestic restructuring as Plassat continues to drive the retailer towards recovery.

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