Price cuts push down Carrefour profits
Retail giant reduces forecasts
A price cutting campaign aimed at restoring sluggish French sales has forced Carrefour to lower its full-year profit forecast.
The world’s second-largest retailer, which has been facing an increasingly competitive market on its home territory, said it will not meet its goal of a double-digit increase in profits for the full year. Carrefour had been forecasting an increase of at least 10 per cent, based on a sales increase in sales of about 5 per cent before currency movements.
Total third quarter sales were €20,314, up 4.2 per cent at constant exchange rates, and 0.6 per cent like-for-like. However, French sales of €9,991 were down by 1.6 per cent like-for-like. The group’s French hypermarket sales fell by 2.6 per cent.
Carrefour said that since it r results at the beginning of September, the market in France, as well as in most other European countries, has deteriorated sharply. It said that in France, September was tough for everyone in the food retailing business, including the discounters, with volumes down significantly, and industry-wide deflation in food and non-food.
Acknowledging that it has contributed to this deflation more than the competition, Carrefour said it has decided to accelerate investment in price cuts in France in order “to achieve price leadership as quickly as possible. As a result of these investments and a worsening macroeconomic environment, we will fall short of our guidance this year.”
Carrefour has invested €229m in price cuts so far this year, and said “our stores have never been more competitive on price in their catchment area. We intend to be price leader in French hypermarkets and we will invest whatever is necessary to achieve our goal.”
Elsewhere, there were mixed fortunes for Carrefour in Europe, with the strongest performance coming from hypermarkets in Portugal and Turkey. Total European like-for-likes, excluding France, grew by 2.2 per cent. Like-for-like sales grew by 7.6 per cent in South America and by 1.7 per cent in Asia.
