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Carrefour sees no sign of pickup yet, keeps targets

Carrefour sees no sign of pickup yet, keeps targets

Paris: French supermarket group Carrefour confirmed its 2009 operating profit would fall up to 18% and said that with no signs of a pickup the market would remain challenging in the second half.

The world’s second-biggest retailer after US company Wal-Mart said first-half operating profit fell 28% to €1.01 billion ($1.45 billion), in line with guidance issued in a profit warning on 30 June.

Full-year profit was expected to fall to €2.7-2.8 billion from 3.3 billion last year “if current sales trends continue", Carrefour said in a statement on Friday, again echoing its 30 June statement.

Shares in Carrefour, which employs nearly 500,000 people in more than 15,000 stores in 30 countries, were 4.9% higher at €33.21 at 0920 GMT, compared with a 1.4% gain on the French CAC 40 index. The DJ Stoxx European retail index was 1.5% higher.

“The share had underperformed since June. The main reasons for this rebound are technical," said one trader who declined to be named. Carrefour stock had lagged other French blue chips by 12% since its profit warning.

Asked about developments in its main French market since the end of June, Carrefour finance head Pierre Bouchut told reporters he had not seen any change.

“We are seeing no sign in our figures of a real pickup at the moment. We don’t see any sign of deterioration compared with the first-half trend either," Bouchut said, adding Carrefour’s results reflected a “difficult environment".

Chief executive Lars Olofsson told a news conference the market would continue to be “challenging" and the second half would be similar to the first.

Earlier this month, Wal-Mart posted better-than-expected quarterly earnings and forecast a full-year profit that could beat Wall Street estimates..

The French group, whose stores range from Ed hard discount shops to Carrefour hypermarkets, is spending on price promotions and has introduced a range of discounted products to tackle its image as an expensive retailer and fight for market share in the downturn.

Earlier this month, the French economy posted a surprise return to growth in the second quarter after a year of recession, although analysts questioned how strong the recovery will be once state support begins to fade.

On 30 June, the group unveiled a plan to make savings of €4.5 billion by 2012 in June by cutting operating costs, improving purchasing terms and reducing inventory times to boost profits. Carrefour confirmed this plan on Friday.

Smaller rival Casino missed forecasts with a 9.1% drop in first-half operating profit on Thursday. It also said trading was “challenging" and it would cut an additional €150 million of costs in 2010.

Carrefour plans to invest €600 million on promotions to bolster market share and make operating cost savings of at least 500 million this year. It has capped capital expenditure at €2.5 billion.

“Our priorities for 2009 remain unchanged," Bouchut said.

“There are very few surprises within the numbers," Credit Suisse analysts say. “Guidance is retained but the company sounds confident that its €500 million cost savings target is a ‘minimum´.

“We remain cautious, especially regarding near-term prospects in France where there are big anniversary campaigns to come this year—E.Leclerc and Intermarche—which are likely to include increased levels of promotions. Longer term, we think there are more attractive recovery stories in the sector."

Carrefour swung to a net first-half loss of €58 million, after a profit of 744 million a year ago.

Income was hurt by €511 million of one-time costs, including a 400 million charge relating to Finiper in Italy to adjust the equity investment and put option relating to the business to fair market value. Without this, net profit would have fallen 41% to 421 million, Bouchut said.

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