Carrefour profit drops 70% pct, eyes 2010 gains

Carrefour profit drops 70% pct, eyes 2010 gains

Paris: Carrefour, the world’s second-biggest retailer, posted a 70% drop in 2009 profit due to asset writedowns and price cuts to attract cash-strapped shoppers, and is reviewing its Belgian operations.

Carrefour, number two behind Wal-Mart, on Friday pledged it would win market share and pursue its turnaround plan in 2010. It also announced plans to start a cash-and-carry businesses in India this year.

The profit was much lower than analysts had forecast, as the group battles fierce competition from price discounters in tough economies.

Carrefour spent much of last year slashing prices to woo cautious consumers in its key markets of France and Western Europe. New chief executive Lars Olofsson also kickstarted a program to make €4.5 billion of savings by 2012.

Carrefour said on Friday it will meet worker representatives next week to discuss the future of its Belgian operations. The company said in a slide for a presentation that it intended to stay in Belgium on a “redefined footing".

Carrefour has been struggling for years to make its Belgian unit profitable, under intense competitive pressure from rivals Delhaize and Colruyt.

Carrefour reported 2009 group net profit of €385 million, down 70%, due to asset writedowns in Italy and price-cutting.

The retailer had been expected to post a 27% fall in group profit from continuing operations to €917 million, according to a Reuters survey of 10 analysts.

The group also concluded a deal in Italy which would slash its debt by €450 million and remove off-balance liabilities by €850 million, and agreed with a Greek partner to boost activities in several countries.

Sanford C. Bernstein analyst Christopher Hogbin said the one-off charges and writedowns will be offset by the sale of Carrefour’s 20% stake in Italian retailer Finiper and the cancellation of its option to buy the remaining 80%, which Carrefour said on Thursday would cut debt and reduce off-balance-sheet exposure by almost €1 billion.

“(It) seems to be that they’ve got themselves out of an off balance sheet liability of up to €850 million," said Hogbin. “I suspect people will look right through (the write downs).

But he said Carrefour’s 27% drop in operating profit in France for 2009, to €1.1 billion, was steeper than expected.

“They’re investing more in France than elsewhere...(It) shows the task they have ahead of them," he said.

Carrefour said it aimed to boost its operating margin from 2%, versus 3.2% in 2008, and will give detailed profitability guidance for 2010 in May or June, chief financial officer Pierre Bouchut told reporters on a conference call.

Carrefour shares were down 1.4% at 0853 GMT.

The stock has gained 5.4% year to date, outperforming a 2.5% gain for the DJ STOXX retail index.

It kept an unchanged dividend of €1.08.