RetailAnalysis
13 April 2017
Carrefour announces mixed Q1 results

France-based Carrefour has said that total sales rose 6.2%, or 1.0% at constant exchange rates and excluding petrol, to €21.3 bn. The retailer saw, at a group level, like-for-like sales, excluding petrol and calendar effects, rise 1.4%. It also highlighted how it had enjoyed strong food sales during the quarter, rising by 5.9%. Despite the positive headline figures, Carrefour's overall performance was affected by weakness at its hypermarkets in France and continuing challenges in China.

France: competitive conditions accentuate hypermarket challenges

Carrefour said its performance in its home market had been affected by 'an unfavorable calendar effect and a very competitive environment'. It noted that consumption in France had contracted in the first two months of the year, but had turned positive in March. It noted that the challenging consumer environment was accentuated by intense promotional activity by a number of competitors, especially in March, with this being led by Leclerc.

Despite the testing market environment, it said that total sales, including petrol, had risen 0.8%, to €9.4 bn, with the results driven by its supermarkets, where total sales rose 1.1%, and its convenience/other formats, 5.5%. In like-for-like terms sales excluding petrol rose 0.5% at a country level, by 2.2% at its supermarkets and by 4.4% at the convenience/other formats. Carrefour said that its convenience and other formats had continued to benefit from its focus on its multichannel strategy, the growth of ecommerce more widely, with it saying that sales through Rueducommerce rose by 'double digits' during the quarter, and the conversion to the Carrefour brand of the DIA stores it acquired.

However, Carrefour said that its overall performance had been affected by a contraction in sales at its hypermarkets. It said that total sales through the channel fell 0.8%, while in like-for-like terms they were down by 1.6%. The retailer did say that it had enjoyed a rise in sales at its renovated hypermarkets, but that the overall effect had not been strong enough. At a channel level Carrefour said that its average basket size was up, but that footfall had dropped, offsetting this positive effect.

Varied performance across European operations

In its operations in Europe, outside France, Carrefour said total sales rose 3.6%, to €5.4 bn, with its topline performance driven by Spain. Across the region the retailer said that like-for-like sales rose 0.9%, with dynamic growth in Italy, where like-for-like sales rose 1.6%, supported by 'strong like-for-like sales growth in Poland and Romania' and a positive performance in Spain. This encouraging performance was offset by its operations in Belgium, where total sales fell by 2.7% and like-for-like sales contracted by 1.8%. The weak performance in Belgium, it said, was due to its decision not to repeat a successful promotional campaign that it ran in Q1 2016.

Latin America benefiting from strong sales growth

In Latin America, Carrefour said total sales rose 30.9%, driven by Brazil, where they increased by 37.6%. Like-for-like sales were up by 7.8% across the region, with a strong rise of 14.6% in Argentina aided by Brazil seeing an increase of 5.6% in the same terms.

Carrefour continued to highlight the performance of its operations in Brazil, where it said its multichannel strategy was being positively received by shoppers and was driving results despite 'an environment marked by high unemployment and a slowdown in inflation'. It said that food inflation in Brazil slowed to 4.0% in Q1 2017, down from 12.0% in Q1 2016, but that this had not resulted in a strong increase in shopper purchases. The retailer said it was particularly pleased by the continued strength of growth at its Atacadão banner and hypermarkets, with the latter enjoying a second consecutive quarter of positive non-food sales growth. Carrefour highlighted the opportunities presented by its convenience stores in the market, which gave it confidence to continue to expand within the channel, following the addition of seven new stores in Q1 2017.

Performance in Asia limited by operations in China

Carrefour noted that it had seen a 'sequential improvement in sales' in Asia. However, this could not take away from the fact that total sales fell by 4.1% in Q1, with like-for-like sales down by 4.0%. China continued to drag on the retailer's performance in the region, with like-for-like sales down by 5.5% during the quarter. While the retailer has continued to back its presence in China, given its long-term potential, the longer its performance remains so weak in the country the more likely an exit becomes.

2017 outlook remains intact after Q1

Following the results, Carrefour's management confirmed it remained confident and focused on driving sales growth, at constant exchange rates, of between 3% and 5% in 2017 overall. It said that its belief in its target was based on shoppers' growing acceptance of and positive reception to its food-focused model. This concentration was aided by the increasingly embedded multi-format and multi-channel strategy being put in place globally.

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