Home >companies >Carrefour picks retail veteran for new turnaround bid

Paris: Carrefour, Europe’s largest retailer, picked retail veteran Georges Plassat as its next boss, signalling key shareholders may back another attempt to fix its ailing hypermarkets rather than push for a break up.

Georges Plassat

“The reference shareholders have been hesitating between restructuring the group or breaking it up. Plassat is the man of a restructuring," said one analyst who declined to be named, referring to Carrefour’s top investors -- French tycoon Bernard Arnault and US private equity firm Colony Capital.

Speculation has long swirled that Olofsson’s departure could herald the break-up of Carrefour, with the possible sale of its faster-growing emerging market businesses.

“Carrefour has lost the confidence of its managers, staff, suppliers and shareholders. Appointing a respected retailer at its helm polishes up the image of the board, which some critics have accused of conducting a short-term financial strategy," CM-CIC analyst CM-CIC analyst Christian Devismes said.

Carrefour, the world’s second-biggest retailer behind US group Wal-Mart, has been struggling for years, partly 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.

Olofsson’s main response was Carrefour Planet, a costly revamp of the stores that has so far not yielded the necessary results and is likely to be scaled down in March amid a worsening economic climate.

A new CEO might pursue an alternative strategy for the hypermarkets, like downsizing them, slashing prices to lure back cash-strapped shoppers who think that Carrefour products are too expensive and investing more in e-commerce, analysts said.

Plassat spent 14 years at French retailer Casino and two years at Carrefour Spain before joining Vivarte in 2000.

Analysts said his depth of experience in both France and general merchandise could help address Carrefour’s key problems, in contrast to Olofsson, who came to the company from a career largely in marketing at Swiss food giant Nestle.

“The appointment of Plassat should be viewed as a big win for Carrefour," said Natalie Berg, director of global research at Planet Retail. “He is a seasoned retail executive with the non-food experience that Carrefour vitally needs."

However, she said Plassat faced an uphill struggle in a world where giant stores are out of fashion and you need to give shoppers a good reason to make that out of town trip.

“Carrefour’s business model is inherently flawed given its over dependence on a dated format and slow-growth markets and a simple change at the helm will not be enough to save the company," she said, predicting Plassat would “pull the plug" at least temporarily on the costly Carrefour Planet hypermarket.

Carrefour shares, which rose last week on talk of Plassat’s appointment, were down 3% at €17.70 by 02:45 pm.

“We think a ‘hope rally´ could be some time off, in the meantime the fundamental issues around underperformance, aggressive competition and weak macro have not changed," said Espirito Santo analysts.

The Task Ahead

Plassat, who holds a stake of about 10% in Vivarte, will join Carrefour on 2 April in the transitional role of chief operating officer, before being appointed CEO at the company’s 18 June shareholders meeting, the company said.

The board of Carrefour, with annual sales of over €90 billion and 470,000 employees in 32 countries, will consider Plassat’s nomination as chairman after the shareholder meeting.

“Georges Plassat declared he is well aware of the magnitude of the task ahead, which will require the support of all within the company," Carrefour said in a statement.

Olofsson’s tenure was marred by a string of poor trading results, management defections and strategic U-turns including a failed merger in Brazil, as well as doubts over his flagship plan to revive Carrefour’s ailing hypermarkets.

Analysts had been looking for Carrefour to pick a retailer with an in-depth knowledge of the French market, where the firm faces fierce competition from unlisted rivals like E. Leclerc.

Plassat’s solid track record in company restructuring won him the backing of Carrefour’s biggest shareholder, the alliance between Arnault and Colony known as Blue Capital.

Blue Capital now owns about 16% of Carrefour and is sitting on hefty paper losses from the investment, which originated with a 2007 stake purchase for over €40 per share. The stock has fallen 24% since Blue Capital installed Olofsson in January 2009.

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