Carrefour eyes 2011 growth, restructuring on track

Carrefour eyes 2011 growth, restructuring on track

Paris: Carrefour, the world’s No 2 retailer, expects higher sales and operating profit in 2011 and is confident in the success of its plan to turn around its struggling European hypermarkets, pushing ahead with cost cuts.

Carrefour, Europe’s biggest retailer which is in the midst of a three-year turnaround plan, said on Thursday it expected to achieve €480 million ($666 million) in cost savings this year and vowed to accelerate its expansion in emerging markets.

This came two days after the French group announced plans to spin off discount chain Dia and 25% of its European property arm in another bid to revive investors’ interest after two profit warnings last year.

“In 2011, we will inject new momentum. We will continue to execute our transformation plan with determination," CEO Lars Olofsson said in a statement.

The group will open 800 new stores in emerging markets and roll out the Carrefour Planet hypermarkets revamp pan in five European countries.

Carrefour, which ranks just behind global leader Wal-Mart, posted 2010 results in line with its guidance.

Current operating profit rose 9.3% to €2.972 billion in 2010, meeting its target for 2.965 billion, driven by cost cuts and growth in Asia and Latin America.

Retailers across Europe and the United States are facing an uncertain outlook amid intense competition, soaring commodity prices and as governments implement austerity measures to cut their debts.

This was underscored by recent results from France’s Casino and US market leader Wal-Mart.

For Carrefour, however, strong growth in Asia and Latin America last year was tainted by problems at its Brazilian hypermarket business, which triggered the two profit warnings.

That undermined confidence which had been building as the group drives through its turnaround plan and starts rolling out a new format for its struggling European hypermarkets.

Carrefour said it would keep its 2010 dividend unchanged at €1.08 per share.

The group, however, announced earlier this week it planned to distribute two exceptional dividends tied to its asset spin-off plan.

Carrefour shares have lagged the STOXX Europe 600 retail index by 8% over the past year. They have gained 9 percent so far this year, outperforming the sector.

This was as speculation mounted Carrefour might sell or spin off assets to bolster in an attempt to revive its share price and placate major shareholders who feel the group’s value is not reflected in its share price. Colony Capital and Groupe Arnault, which hold 13.5% of Carrefour, are still holding a paper loss on their 2007 investment, which was made at about €50 a share.

The shares closed at €33.60 on Wednesday, giving Carrefour a market capitalisation of €23 billion.