Carrefour warns on profit again ahead of strategy plan

Carrefour cut its 2017 profit forecast for the second time in six months on Wednesday, as its new boss prepares to unveil a turnaround plan for the world’s second-largest retailer next week.

The French supermarket group said it now expected recurring operating profit of about 2 billion euros ($2.5 billion). That would be down 15 percent year-on-year at current exchange rates, worse than the 12 percent drop it forecast in August.

Several analysts, including at Barclays and HSBC, had been expecting the downgrade given the challenges the company faces in several markets.

”2017 was clearly disappointing,“ finance chief Matthieu Malige told analysts, citing ”strong commercial pressure in France and food deflation in Brazil, the group’s second-largest market after France.

The new profit forecast also reflects an increase in distribution costs in Carrefour’s main markets, higher depreciation after a period of significant investments, a more difficult environment in Argentina and 150 million euros of losses at the former Dia stores that Carrefour is converting.

Carrefour, Europe’s largest retailer and world No.2 behind U.S. group Wal-Mart, said 2017 sales reached 88.24 billion euros, a like-for-like rise of 1.6 percent but a slowdown from 3 percent growth in 2016.

IMPROVING Q4 SALES

Fourth quarter sales alone, however, reached 23.33 billion euros, just above analysts’ average forecast of 23.2 billion.

Stripping out fuel, currency and calendar effects, fourth quarter revenue grew 1.9 percent year-on-year, a sequential improvement from 0.5 percent growth in the third quarter.

Improving the French hypermarket business is a priority for new boss Alexandre Bompard, who joined in July.

That goal has eluded several predecessors amid online competition and price discounting from other rivals such as unlisted supermarket operator Leclerc.

Bompard will unveil his strategy for Carrefour on Jan. 23.

In France, where Carrefour makes 47 percent of its sales, like-for-like revenues rose 1.5 percent in the fourth quarter following a 0.9 percent drop in the third.

The improvement reflected a successful ‘Black Friday’ promotion campaign and year-end promotions, the company said.

French hypermarket sales also improved, rising 0.7 percent in the fourth quarter after falling 1.7 percent in the third.

Earlier on Wednesday, Carrefour’s smaller rival Casino posted weaker fourth quarter sales, hitting its shares, with analysts disappointed by Casino’s guidance for 2017 profit growth in its core French business.