4Q18 Trading Update Carrefour reported group comparable sales excluding automotive fuel were up 1.9% year over year in 4Q18, versus 2.1% growth in 3Q18 and ahead of the consensus estimate of 1.0% recorded by StreetAccount. Performance in France was weak and growth was driven by Latin America. Total sales at actual exchange rates were down 2.3% year over year, impacted by currency effects. 

• Comparable sales in France were down 0.1%, slowing sharply from 1.6% growth in the prior quarter but ahead of the consensus estimate of a 0.7% fall. Management noted that it saw a negative impact from France’s “yellow vests” protests, which mainly impacted hypermarkets — where comparable sales were down 2.2% versus consensus of a 2.8% fall.  
• Europe ex-France was down 1.7% on a comparable basis, following a 1.5% decline in the prior quarter and against expectations of a 1.3% drop. Italy was notably weak, with comp sales down 4.6%, though Spain and Belgium were both negative, too. 
• Latin America reported comparable sales growth of 12.9% at constant currency, accelerating from 9.7% growth in 3Q18 and ahead of expectations of 10.4% comp growth. Brazil comps were up 6.2% versus 5.1% in the prior quarter and expectations of 5.8% growth; sales were helped by the return of food-price inflation. 
• Asia comparable sales were down 4.1% at constant currency in 4Q18, worsening from a 2.8% decline in 3Q18 and below consensus of a 3.5% fall. China comp sales were down 6.2% compared to the prior quarter of (4.8)% and consensus of (5.3)%. 

Management noted progress in its Carrefour 2022 turnaround plan:

• The company accelerated growth in organic product sales in 2018 to around €1.8 billion, versus €1.3 billion in 2017 and “a first step” toward its target of €5 billion in organic sales in 2022. 
• In France, the total product range has been reduced by 7.5% and the company is “on track” to meet its target of a 10% reduction in product lines. 
• In a number of hypermarkets, Carrefour has opened shops-in-shops for electronics retailers: Darty in France, Media Markt in Poland and Gome in China. It has also reallocated sales areas in some larger stores, with 20,000 square meters of space cut in France and some hypermarkets in Belgium and Agentina converted to supermarkets. 
• It has partnered with Google and Tencent on new technologies. 
• It has increased its e-commerce capacity with the opening of new Drives (drive-thru collection points) and pedestrian Drives, and new “order preparation tools” and standalone “order preparation platforms” for online purchases. The company reported an increase in online food sales of more than 30% in 4Q18.

Outlook The company noted it expects to report FY18 recurring operating income of around €1.93 billion, up €85 million from FY17. Management confirmed the targets under the Carrefour 2022 plan, which include:

• Annual cost reductions of €2 billion by 2020.
• Disposing of nonstrategic real estate assets for €500 million by 2020.
• €5 billion in e-commerce food sales in 2022.
• €5 billion in organic product sales in 2022.

For FY18, analysts expect Carrefour to report a 6.4% decline in EBIT, yielding an EBIT margin of 2.2%. According to S&P Capital IQ, consensus calls for the company to report a 5.1% fall in adjusted net income for FY18.