*Calculated based on total revenue. Source: Company reports/Fung Global Retail & Technology

1H16 RESULTS

Carrefour, the French multinational retail giant, reported net sales of €36,289 million in 1H16, down 3.8% but up 2.2% at constant currency from €37,739 million in 1H15. The company said that it was affected by “a difficult consumption environment” along with slow sales of products traditionally associated with spring and summer, such as drinks, barbecue equipment and swimming gear. Recurring operating income was €706 million, down 3.0% from 1H15, but up 5.3% in constant currency. Adjusted net income (excluding nonrecurring items) grew by 0.9%, to €235 million, beating the consensus estimate, but the reported net income for the group fell by 40.8%, to €129 million, missing the consensus estimate. The nonrecurring items were mainly costs of reorganizing operations across various countries, as Carrefour continues to work on converting stores that were acquired from DIA and Billa. Adjusted EPS was €0.32 for the period, unchanged from 1H15 but ahead of the consensus estimate of €0.26.

PERFORMANCE BY GEOGRAPHY

France

Sales in France accounted for 47% of Carrefour’s net sales. Organic sales and comps mentioned below exclude gasoline and calendar effects.

• Net sales in France fell by 2.3%, to €17.2 billion, in 1H16.
• Organic sales fell by 1.5% and comps fell by 0.5%.
• The company blamed unfavorable weather and social unrest for the disappointing performance in the country. It added that the trend for organic, gluten-free and artisanal products has picked up in France and that Carrefour is now the largest seller of organic food products in the country. It said that it plans to expand its organics assortment in the near future.
• The company transformed 260 DIA stores to the Carrefour banner during the period.

Other European Countries

• Net sales in the other European countries grew by 0.8% at current exchange rates and by 1.3% at constant currency rates, to €9.4 billion.
• Organic sales grew by 1.5% and comps grew by 2.2%.

Latin America

• Carrefour’s net sales in Latin America fell by 11.1% at current exchange rates, but rose by 17.5% in constant currency, to €6.5 billion.
• Organic sales and comps grew by 17.9% and 14.5%, respectively.
• The company noted that it saw a faster pace of growth in Brazil in the second quarter, with all the above metrics registering double-digit growth except for sales at current exchange rates, which fell by 1.0%.

Asia

• Net sales in Asia fell by 8.7% at current exchange rates and by 4.6% in constant currency, to €3.2 billion. Organic sales and comps fell by 5.3% and 5.4%, respectively, hit by an economic slowdown in the region and changing shopping habits of Chinese consumers, who are shopping online more often.
• CEO Georges Plassat noted that food services and restaurants were two emerging trends in Asia, and that the company is working on developing its “food-based” image. He also said that Chinese consumers are quick to pick up trends from the West and that there has been increasing demand for organic and gluten-free food, although demand for Chinese food products has remained strong.
• Plassat noted that the company has been working on transforming its model in China and that it is close to consolidating with local players that complement Carrefour’s business, as it did with its operations in Brazil.
• Carrefour said that it saw strong growth in sales, traffic and profit in Taiwan.

Other Notable Developments

• Carrefour declared a dividend per share of €0.70 when it reported FY15 results in March 2016. At the annual general meeting held in May, it offered shareholders an option to receive dividends in the form of additional shares. At the end of the option period, the take-up ratio for dividends paid through shares was 76.3%, which resulted in additional capital resources of €396 million for the company.
• Carrefour has created a real estate company called Cargo that is dedicated to logistics.
• Rue du Commerce, which Carrefour acquired earlier this year, has made its first contribution to revenues.

OUTLOOK

Carrefour will continue working on expanding and modernizing its store network across all countries. It also intends to accelerate digital transformation through the company. It expects to make investments of €2.5–€2.6 billion, and achieve increased cash flow and a stable net debt versus the last fiscal year by the end of FY16.