Carrefour Q2 results: solid performance, confidence in transformation

Maxime Delacour
Senior Retail Analyst
@RetailAnalysis

Date : 30 July 2020

Carrefour reported Q2 results as like-for-like (LFL) sales increased by 6.3%. The strong results were driven by the good performance and omnichannel strategy in most markets including Spain, Belgium and Brazil.

Q2: atypical activity due to COVID-19, convenience +19.0% LFL

The multi format and omnichannel model confirmed its resilience and adaptation to the various shopper needs during the different phases of the pandemic. Food sales performed positively during quarter (+5.5% LFL). Non-food sales saw declined in April (-7.9% LFL), although sales recovered in May and June (+19.9% LFL).

Most countries where the group operates were impacted by the lockdown in April, resulting in strong sales in the convenience channel (+19.0% LFL) and negative performance at hypermarkets
(-4.6% LFL).

From May, several European markets started to ease lockdown measures. The Group’s supermarket channel saw LFL growth of 8.9%. With shoppers being able to move more freely, hypermarkets started to recover (+8.0% LFL) and convenience stores maintained positive performance (+5.5% LFL), despite footfall slowing down.

France: convenience saw double digit LFL growth of +11.4%

Hypermarkets: LFL sales declined by 3.6% due to the movement restrictions imposed by the government during lockdown. However, sales have improved since mid-May amid the end of restrictions. The price image and larger size of stores helping in easing social distancing were strong assets contributed to drive footfall again.

Supermarkets: LFL sales increased by 4.3% and continued to perform well, while the convenience maintained double digit growth with LFL up by 11.4%. Both formats benefited from store proximity to shoppers and large assortments that catered to most needs.

Europe: growth in Belgium and Spain vs. decline in Italy, Poland and Romania

LFL growth in Europe reached +4.7% in Q2, driven by Belgium and Spain:

  • Spain (+9.8% LFL): Carrefour benefited from the shift from dinning out to eating in at most stores, including hypermarkets. Its ecommerce sales doubled during the quarter. The high level of customer service during the lockdown compared to its competitors was a success
  • Belgium (+15.9% LFL): according to Nielsen, Carrefour continues to gain market share, following good results in Q1. It benefited from its medium-size hypermarkets located near city centres, its new price positioning launched in November 2019 and an overall dynamic grocery market due to the closure of borders
  • Italy (-7.4% LFL): the location of many stores in shopping centres and tourist areas severely impacted sales
  • Poland (-4.2% LFL) and Romania (-2.2% LFL): sales were affected by the strong reliance of stores in shopping centres, which have been closed during lockdown

Latin America: strong performance as LFL sales increase by 20.9%

The excellent momentum in Latin America continued with LFL sales rising by 20.9% in Q2:

  • Brazil (+15.4% LFL): Carrefour Retail posted excellent sales growth of 30.3% LFL driven by food and non-food categories and the new strategy implemented in 2018. Ecommerce LFL sales grew by over 360%. Atacadão’s LFL sales rose by 8.6% driven by continued expansion
  • Argentina (+54.0% LFL): investment in prices and the good location of stores contributed to create differentiation with other competitors and drive sales

Taiwan: sales declined but maintained market share

Carrefour Taiwan saw LFL sales decreased by 2.5% but maintained its market share in a market shrinking during Q2 according to Nielsen.

Carrefour Group H1: LFL sales +7% as confidence in transformation strengthens

In the first half of 2020, Carrefour Group posted LFL sales growth 7.0% and a 29.1% increase in recurring operating income at constant exchange rates. These results have strengthened confidence in the success of the Carrefour 2022 transformation plan. The group is also on track to reach its strategic objectives for 2022:

  • Customer satisfaction: NPS (net promoter score) +3 points. The customer satisfaction’ strategy is based on the collective commitment from all employees of the group
  • Food ecommerce saw growth of 70% in H1 to reach €1.1bn, driven by the surge in demand for online shopping during the COVID-19 pandemic. In addition, Carrefour increased its distribution capacities with 337 new click and collect points, new in-store preparation areas and an acceleration of warehouse automation. New partnerships with Uber Eats and Glovo also contributed to improve delivery services
  • Price competitiveness: since 2018, the group is investing to improve its price competitivity. In France, Carrefour has launched new loyalty rewards on fresh food products and lowered the prices of 150 of its core private label products. In Belgium price cuts were applied on more than 1,000 products at the end of May. The focus is on private label brands, with penetration was up by 2% in H1 to reach 29% of sales
  • Organic and local products: The sale of organic products grew by 25% to €1.4bn in H1. In France, Carrefour has increased its share of products locally sourced and supports farmers in their conversion to organic farming. The expansion of the SoBio banner continues with six new stores opened during the first half of the year.
  • Cost reduction: Carrefour continues to reduce its operating costs to become more efficient. In H1 2020, it achieved savings of €480m, reaching a total of €2.44bn since the beginning of the plan set in 2018.  It has even raised its savings target of €2.8bn to €3bn for 2020.
  • Targeted acquisitions: the retailer is increasingly considering acquisition opportunities of moderate size across the different countries of operation as part of its consolidation strategy. In Q1, Carrefour Brazil signed an agreement with Makro for the acquisition of 30 cash and carry stores. In Q2, Carrefour Taiwan entered into an agreement with Dairy Farm to acquire Wellcome Taiwan to accelerate its expansion through the acquisition of 224 convenience stores

Statement from Alexandre Bompard, Carrefour Group's chairman and CEO:

"Our first-half performance is very solid: It proves the resilience of our model, its dynamism and its profitability. It owes a lot to the responsiveness and exceptional commitment of our teams, who overcame difficult operational conditions to provide our customers with the support and solutions they expected from us.

The crisis confirms the relevance of our multi-format and omnichannel strategy, as well as the strength of our commercial assets, resulting from three years of a demanding and rapid transformation. It is also rich in lessons. It encourages us to step up our environmental commitments, in the service of the food transition for all. And above all, it sheds light on the need for proximity to our customers, which, when it is a constant priority, is immediately reflected in performance.

To draw all the operational implications, I renewed the management team and united it around a clear mandate: Operational excellence to better serve customers. This is the reason behind the managerial changes made in France, Spain, Italy and Poland. Now that solid foundations have been laid in recent years in these countries, they bring new energy to amplify our commercial gains.

The further improvement in our results this half, the growing satisfaction of our customers, our ability to seize opportunities to create value - all these achievements further strengthen my confidence in the success of our Group. We reaffirm or enhance the objectives that we have set for ourselves, both financial and extra-financial."