Weak sales highlight size of task facing incoming Carrefour chief

Carrefour, Europe’s biggest retailer, laid bare the pain being felt by austerity-hit shoppers, reporting a plunge in demand for discretionary purchases such as clothing and electrical goods and a deteriorating performance at its core French hypermarkets.

The weak first-quarter sales highlight the size of the task facing incoming chief executive Georges Plassat, who takes the helm in June with a brief to reverse years of under-performance.

Retailers across much of Europe are struggling as shoppers’ disposable incomes are squeezed by rising prices, muted wages growth and austerity measures, while confidence is sapped by the ongoing eurozone debt crisis.

Carrefour, the world’s second-biggest retailer behind US giant Wal-Mart, is exposed to some of the worst-hit countries including Spain, Italy and Greece, where sales of non-food goods from stores open for over a year plunged by 10% or more in the first quarter.

The French group is also battling longer-term problems due to its reliance on hypermarkets, which have been losing out as time-pressed shoppers buy more goods locally and online and prefer to purchase general merchandise from specialist stores.

The company said first-quarter sales reached €22.49bn, a year-on-year rise of 1.5% that reflected additional store opening days and higher fuel prices.

Stripping out fuel, currency and calendar effects, sales fell 2.1%, with French hypermarket sales down 5.8% — worse than the 4.7% drop in the fourth quarter. “Overall we see nothing positive to take from this statement, and it is clear that non-food trends are either deteriorating or remaining sharply negative,” Espirito Santo analysts said.

Carrefour shares climbed 2% in early trade, however, bouncing back after a near- 20% slump over three weeks on relief that sales roughly met expectations.

In emerging markets, China continued to struggle, while Brazil, now Carrefour’s second-largest market after France, put in a robust performance.

Carrefour tied the slump in French hypermarket sales to a tough economic climate and to the initial effects on sales of its ‘Reset’ plan, which entails fewer one-off promotions and more consistently lower prices.

Carrefour warned the shift would initially hit its store traffic and sales before volumes start to pick up.

Finance chief Pierre-Jean Sivignon told analysts Reset was on track and that Carrefour had “somewhat improved” its price positioning and its price image in the quarter.

The appointment of Mr Plassat has fuelled hopes of a new strategy, but analysts said they do not expect big announcements in the short-term.

— Reuters