New advances in the Carrefour 2022
transformation plan
Regulatory News:
Carrefour (Paris:CA):
- Acceleration in sales growth to
+2.1% like-for-like in the third quarter (vs +0.7% in H1), notably
in France (+1.6%) and in Brazil (+5.1%), reflecting:
- Better momentum in France, driven by an
improved commercial performance in all formats and better market
trends
- Strongly accelerating growth in Brazil,
supported by an improved commercial performance and a return to
slight food inflation; total growth was also driven by the rapid
expansion of Atacadão
- Food e-commerce sales growing above
30%
- New advances in the roll-out of the
« Carrefour 2022 » plan:
- Roll-out of the omnichannel
offer: Opening of new Drives and pedestrian Drives; extension
of home delivery offer; continued roll-out of single entry-point
merchant websites
- Acceleration of the revamp of the
in-store commercial proposition: Continued commercial
investments; acceleration of the plan to reduce selling area in
hypermarkets; launch of Darty shop-in-shop tests in France
- Sustained pace of expansion in
growth formats: More than 300 store openings in convenience and
14 Atacadão openings in Brazil over the past nine months
- Implementation of the purchasing
alliances with Système U and Tesco
- Progress in the transformation of
organizations: Exit of the ex-DIA stores from the Group’s scope
at end-July; transfer of 5 hypermarkets to lease management
contracts in France in September; closing of the voluntary
departure plan covering 2,400 positions at headquarters in
France
- Further productivity and
cost-reduction initiatives: Significant progress in selectivity
and productivity of investments, allowing the Group to carry out
its investment program while containing capex, estimated at between
€1.7 billion and €1.8 billion in 2018
- Concrete actions to promote the food
transition for all: Success of the Act for Food
international campaign; acquisition of the SoBio chain, specialized
in organic products
The continuing revamp of the omnichannel
commercial proposition and financial discipline, in line with the
Carrefour 2022 transformation plan, strengthen the Group’s growth
potential and Free Cash Flow generation.
Sales inc. VAT
(€m)
Q3
LFL Total variation
At currentexchangerates
At constantexchangerates
Group 21,087 +2.1%
-2.8% +2.7% France 10,096
+1.6% +2.1% +2.1% Europe 5,802
-1.5% -1.6% -1.3% Latin America 3,612
+9.7% -15.8% +11.7% Asia 1,577
-2.8% -3.4% -2.6%
Carrefour 2022 transformation plan: New advances that confirm
good execution momentum
During the third quarter, the Group made further significant
advances in the "Carrefour 2022" plan, confirming the rapid
implementation of its ambitious and far-reaching transformation
plan. Many projects are conducted in parallel, notably:
Continued rapid deployment of the omnichannel offer: More
than 30% growth in food e-commerce sales
The group is continuing its digital strategy and deploying its
omni-channel offering. Food e-commerce sales grew by more than 30%
in the third quarter.
The deployment of single entry-point
websites in each country continues. After Brazil, Poland and
Romania in the first half and Italy in Q3, all countries will have
a single merchant website by the end of the year.
The development of online order
preparation tools continues. They aim to optimize the rate
of service, speed and cost of order preparation. In France, order
preparation platforms (PPC) opened in 2017 and in H1 2018 are
gaining momentum and showing encouraging results. The Group is also
deploying hybrid solutions, combining in-store picking with a
dedicated compact preparation platform in the store reserves.
Pick-up and delivery services are
growing: 55 new Drives in France in Q3 (785 at the end of
September, of which 16 pedestrian Drives); growing coverage of
standard and express home delivery services; launch of a new Drive
and deployment of Click & Collect in Brazil.
In China, e-commerce sales are growing strongly, thanks to the
success of the "O2O" offering, which has been extended to new
partners.
Revamp of the in-store commercial proposition
Commercial investments aiming at
strengthening the Group's price competitiveness continued in the
third quarter.
The overhaul and downsizing of
assortments is also progressing with:
- The development of the number of
private-label and Carrefour Quality
Line SKUs
- Massification of non-food ranges among
Group countries and simplification of
assortments to concentrate on high-rotation products
- Expanding the range of organic products in several countries,
combined with the roll-out of dedicated in-store areas; in France,
the new organic concept is already rolled out in 85% of the
hypermarket store network
Shop-in-shops of home appliances will be tested with Darty in
France and Gome in China in the fourth quarter.
The adaptation of the selling area
and typology of stores to the catchment area is accelerating, with
reductions in hypermarket sales area and conversions of
hypermarkets into Cash & Carry stores:
- In France: About 10,000 sqm in
hypermarkets have already been reallocated, notably to outlets or
hybrid order preparation platforms for online orders. Another
40,000 sqm are the object of advanced studies. This reduction in
selling area chiefly concerns the non-food area
- In Belgium: Five hypermarkets
will be converted into supermarkets in November
- In Italy: Reduction of 45% of
the sales area of one hypermarket and closure of another unit in
Q3
- In Argentina: Conversion of 12
hypermarkets into Maxi stores at end-October
- In Brazil: A first hypermarket
has been converted to the Atacadão banner during the quarter
Continued expansion in growth formats
Openings continued in growth formats with conclusive
results:
- Cash &
Carry: Four Atacadão openings in the quarter and
confirmation of the target of 20 new stores in 2018; confirmation
of target of 16 new Maxi stores in Argentina, of which 12
conversions at end-October
- Convenience: More than 300 new stores have been
opened since the start of the year, of which 126 in the
quarter
Implementation of purchasing alliances with Système U and
Tesco
At the end of the review period by the competition authorities,
Carrefour and Système U began the operational implementation of the
"Envergure" purchasing organization in September, while the
partnership with Tesco for international purchasing was implemented
in early October. The gains related to these two agreements are
expected from 2019 onwards.
Continued organizational transformation
Organizational transformation
initiatives continued in the third quarter, notably with the
exit from the Group's scope of all ex-Dia stores at the end of
July, the move to lease management contracts of five hypermarkets
in France in September and the closing in September of the
voluntary departure plan at headquarters in France, covering 2,400
positions.
In Argentina, the social plan was completed, with the closure
during the summer of one hypermarket and six supermarkets and the
departure of 750 employees within the framework of the voluntary
departure plan.
In Belgium, the effective departure of 1,000 employees on a
voluntary basis will take place between November 2018 and June
2019.
Continuing cost reduction initiatives and rapid progress in
investment optimization
Initiatives to reduce costs and
optimize inventories continued in the third quarter.
The project to reinforce selectivity and
productivity of investments has exceeded initial objectives.
This allows Carrefour to carry out its investment program while
containing capex, estimated at between €1.7bn and €1.8bn in
2018.
Actions in line with Carrefour’s ambition: Be the
leader in the food transition for all
A Food Orientation Committee was
created in September to advise the group in its ambition to be the
leader in the food transition for all. Composed of experts
committed to all issues of the food transition, its mission is to
support Carrefour in transforming its model, to participate in
concrete projects related to the food transition and to make
proactive proposals. It will meet on October 19th for a first
working session.
Launched in September, the international Act for Food campaign has met with great success.
Rolled out in every country, it presents Carrefour's commitments
and concrete actions in favor of food quality.
The Group completed the acquisition of the SoBio chain, which is
the starting point for the deployment of a network of stores
dedicated to organic products. At the same time, Greenweez
completed the acquisition of Planeta Huerto to extend to Spain and
Portugal the group's presence in online distribution of organic
products.
In France, 140 partnership contracts were signed with farmers to
support their conversion to organic
farming.
Moreover, the deployment of Blockchain
technology continues with its introduction to 12 Carrefour
Quality Lines by the end of the year, in France and internationally
(Belgium, Italy and China). On October 8, the group also announced
that it was one of the founding members of the IBM Food Trust
platform. This platform is expected to accelerate the deployment of
Blockchain technology to new product lines and build partnerships
with international brands.
First disposals of non-strategic real estate assets
As part of its objective of selling €500m of non-strategic real
estate assets, the group has already concluded several transactions
for a total of nearly €60m.
The target of disposing of €100m of non-strategic real estate
assets in 2018 is confirmed. The actual disposals could take place
at the beginning of 2019, taking into account procedural
deadlines.
THIRD-QUARTER 2018 SALES INC. VAT: Acceleration vs the
first half
Carrefour's sales in the third quarter of 2018 amounted to
€21,087m, up + 2.7% at constant exchange rates. After taking into
account an unfavorable currency effect of -5.5%, mainly due to the
depreciation of the Brazilian Real and the Argentine Peso, sales
were down -2.8% at current exchange rates.
On a like-for-like basis, sales rose + 2.1% in the quarter, an
acceleration compared to the first half like-for-like growth of +
0.7%. Total growth at constant exchange rates (+2.7%) also includes
a calendar effect (-1.0%), the contribution of petrol sales
(+1.3%), as well as the effect of openings (+1.2%) and closures
(-0.7%).
France posted +1.6% growth in LFL sales, a sharp
improvement over H1 (H1: -0.1% LFL). All formats contributed to
this trend: hypermarkets (stable LFL), supermarkets (+2.6%) and
other formats (+4.7%). Over the third quarter, the group reduced
its LFL performance gap with the market and also benefited from
better market trends. Food in particular contributed to this trend,
while non-food markets remained negative.
Europe (-1.5% LFL) posted a similar trend to the first
half:
- In Spain (-2.7% LFL), the Group
was penalized by an environment that remained very competitive in
the third quarter amid difficult non-food markets
- Italy (-4.4% LFL) showed a
slight downturn compared to the first half (H1: -3.6% LFL), in
slowing markets that were in decline in the third quarter. A new
country CEO was appointed in early October. His mission is to
accelerate the transformation of Carrefour Italy
- Belgium (+0.5% LFL)
significantly improved its performance compared to the first half
(H1: -2.0% LFL), which had been impacted by operational
disruptions
- Growth also continued in Romania
(+4.0% LFL). In Poland (+2.7% LFL), good commercial dynamics
limited the impact of the Sunday ban
Latin America (+9.7% LFL) significantly improved its
momentum compared to the first half (H1: +6.4% LFL), both in Brazil
and in Argentina.
In Brazil, Carrefour posted strong growth of +5.1% on a
like-for-like basis. Momentum improved significantly compared to
the first half (H1: +1.9% LFL). After the first-half food
deflation, the market saw a return to slight inflation starting in
June.
- Driven by an increase in volumes,
Atacadão posted strong sales momentum (+6.2% LFL), confirming once
again the model’s attractiveness. The contribution of expansion
accelerated (+6.0% in Q3) thanks to 14 new openings since the start
of the year (including one hypermarket conversion)
- Carrefour Retail also accelerated to
+2.5 % LFL growth vs +0.5% in H1, supported by e-commerce
- Solid momentum continued in financial
services, notably driven by the growth of the Atacadão card (1.4
million cardholders at end-September)
In Argentina (+28.6% LFL), amid a complex macroeconomic
context, the continuation of Carrefour's commercial initiatives,
particularly in favor of purchasing power, is reflected in an
acceleration of growth, driven by a significant increase in
volumes.
Momentum is also improving in Asia (-2.8% LFL). In
China (-4.8% LFL vs -6.4% in H1), Carrefour’s performance is
driven by the rapid development of online activity, which benefits
from the development of new partnerships. In Taiwan,
momentum remains steady at + 1.4% LFL.
A SOLID FINANCIAL STRUCTURE
Carrefour benefits from a solid balance sheet that was
strengthened since the start of 2018. It is rated BBB+ with a
negative outlook by Standard & Poor's and Baa1 with a stable
outlook by Moody's.
In the first half, the Group successfully carried out two bond
issues for an amount exceeding €900m, confirming the quality of the
Carrefour Group's signature.
In addition, the Group has undrawn credit facilities from its
banking partners for €3.9bn maturing in 2022 and 2023.
FINANCIAL OUTLOOK
In the third quarter of 2018, the group posted accelerating
sales momentum, reflecting a gradual improvement in its business
model. At the same time, new milestones were achieved in the
implementation of the Carrefour 2022 plan, confirming the solid
transformation dynamic at work within the group.
These elements reinforce management's confidence in the
relevance of the Carrefour 2022 plan, which supports the Group's
ambition: To be the leader in the food transition for all.
In the coming quarters, Carrefour will continue to implement the
transformation plan at a sustained pace, including new advances in
its omnichannel offer (notably Drives, pedestrian Drives and
finalizing the implementation of single e-commerce websites), the
acceleration of the revamp of the in-store commercial proposition
and reinforced operational efficiency (costs, investments and
inventories).
The group confirms all its targets, notably:
- A cost-reduction plan of €2bn on an
annual basis by 2020
- The disposal of non-strategic real
estate assets for €500m by 2020
- €5bn of food e-commerce sales in
2022
- €5bn in sales of organic products in
2022
Thanks to progress achieved in terms of selectivity and
productivity of its investments, the group is able to carry out its
investment program while containing Capex, estimated at between
€1.7bn and €1.8bn in 2018
APPENDIX
Application of the IAS 29 norm, related to the hyperinflation
situation in Argentina
The impacts of the IAS 29 accounting norm relative to "Financial
Reporting in Hyperinflationary Economies" are being quantified and
analyzed, pending the clarification of the parameters that will be
retained locally. As such, Q3 sales are not restated.
THIRD-QUARTER 2018 SALES INC. VAT
Sales inc. VAT
(€m)
Variation ex petrol ex
calendar
Total variation inc. petrol LFL
Organic
at constant exchange
rates
at current exchange
rates
France 10,096 1.6% 0.7%
2.1% 2.1% Hypermarkets 5,183 0.0% -0.6%
0.3% 0.3% Supermarkets 3,291 2.6% 1.0% 3.2% 3.2%
Convenience/other formats 1,622 4.7% 4.5% 6.1% 6.1%
Other
countries 10,992 2.4% 3.5%
3.2% -7.0%
Other European countries
5,802 -1.5% -1.3% -1.3%
-1.6% Spain 2,472 -2.7% -2.3% -1.7% -1.7% Italy 1,258 -4.4%
-5.4% -5.7% -5.7% Belgium 1,045 0.5% -0.2% -1.3% -1.3% Poland 494
2.7% 4.3% 3.2% 2.1% Romania 534 4.0% 6.8% 7.6% 6.1%
Latin
Amerca 3,612 9.7% 12.7%
11.7% -15.8% Brazil 3,040 5.1% 9.2% 8.1%
-12.5% Argentina 572 28.6% 26.7% 26.8% -29.7%
Asia
1,577 -2.8% -3.5% -2.6%
-3.4% China 1, 032 -4.8% -7.0% -6.6% -7.6% Taiwan 545 1.4%
4.0% 6.0% 5.7%
Group total 21,087 2.1%
2.3% 2.7% -2.8%
Variations ex calendar and ex petrol are presented in relation
to the restated 2017 sales, i.e. excluding sales of ex-Dia stores
that exited the Group’s scope in the third quarter.
NINE-MONTH 2018 SALES INC. VAT
Sales inc. VAT
(€m)
Variation ex petrol ex
calendar
Total variation inc. petrol LFL
Organic
at constant exchange
rates
at current exchange
rates
France 29,303 0.5% -0.5%
1.3% 1.3% Hypermarkets 15,028 -1.1%
-1.6% 0.0% 0.0% Supermarkets 9,682 1.4% -0.3% 1.7% 1.7%
Convenience/other formats 4,593 3.3% 3.1% 5.1% 5.1%
Other
countries 33,223 1.6% 2.9%
3.2% -6.5%
Other European countries
17,028 -1.5% -0.9% 0.0%
-0.2% Spain 6,982 -2.1% -1.5% 0.8% 0.8% Italy 3,896 -3.8%
-4.1% -3.9% -3.9% Belgium 3,125 -1.1% -1.6% -1.9% -1.9% Poland
1,499 1.4% 3.4% 3.0% 3.3% Romania 1,527 4.8% 7.7% 8.3% 6.0%
Latin
America 11,455 7.5% 10.5%
10.1% -14.2% Brazil 9,458 3.0% 6.9% 6.6%
-12.3% Argentina 1,997 26.1% 25.4% 25.4% -22.2%
Asia
4,740 -3.5% -4.2% -4.0%
-7.4% China 3,227 -5.9% -7.5% -7.6% -10.3% Taiwan 1,513 1.9%
3.8% 4.5% -0.4%
Group total 62,526 1.1%
1.5% 2.4% -3.0%
Variations ex calendar and ex petrol are presented in relation
to the restated 2017 sales, i.e. excluding sales of ex-Dia stores
that exited the Group’s scope in the third quarter.
EXPANSION UNDER BANNERS – THIRD QUARTER 2018
Thousands of sq. m
Dec 31, 2017
June 30,2018
Openings/Store
enlargements
Acquisitions
Closures/ Store
reductions
Total Q3 2018 change
Sept. 30, 2018
France 5,764 5,553 10 - -6
4 5,557 Europe (ex France) 5,599 5,581 21 - -32 -11
5,571 Latin America 2,408 2,450 28 - -7 21 2,471 Asia 2,736 2,660 2
- -1 1 2,661 Others1 1,111 1,132 12 -
- 12 1,143
Group 17,618
17,376 74 -
-46 27 17,403
STORE NETWORK UNDER BANNERS – THIRD QUARTER 2018
N° of stores
Dec. 31, 2017
June 30, 2018
Openings Acquisitions
Closures/ Disposals
Transfers
Total Q3 2018 change
Sept. 30,2018
Hypermarkets 1,376 1,377
- - -2 -2
-4 1,373 France 247 248 -
- - -2 -2 246 Europe (ex France)
460 455 - - -1 - -1 454 Latin America 193 191 - - -1 - -1 190 Asia
365 371 - - - - - 371
Others1
111 112 - - - - -
112
Supermarkets 3,243
3,255 28 - -24
2 6 3,261 France 1,060
1,059 2 - -1 2 3 1,062 Europe (ex France) 1,756 1,749 11 - -17 - -6
1,743 Latin America 147 147 1 - -6 - -5 142 Asia 58 64 4 - - - 4 68
Others1 222 236 10 - - -
10 246
Convenience stores 7,327
6,951 126 -
-101 - 25 6,976
France 4,267 3,939 36 - -38 - -2 3,937 Europe (ex France) 2,446
2,408 85 - -60 - 25 2,433 Latin America 521 520 3 - - - 3 523 Asia
41 31 - - -3 - -3 28 Others1 52 53 2 -
- - 2 55
Cash & carry
354 364 5 -
- - 5 369 France
144 144 - - - - - 144 Europe (ex France) 42 44 1 - - - 1 45 Latin
America 153 163 4 - - - 4 167 Asia 2 - - - - - - - Others1
13 13 - - - - - 13
Group 12,300 11,947
159 - -127 -
32 11,979 France 5,718 5,390 38 - -39 -
-1 5,389 Europe (ex France) 4,704 4,656 97 - -78 - 19 4,675 Latin
America 1,014 1,021 8 - -7 - 1 1,022 Asia 466 466 4 - -3 - 1 467
Others1 398 414 12 - - -
12 426
1 Africa, Middle East and Dominican Republic.
DEFINITIONS
LFL sales growth:
Sales generated by stores opened for at least twelve months,
excluding temporary store closures, at constant exchange rates,
excluding petrol and calendar effects.
Organic sales growth
Like for like sales growth plus net openings over the past
twelve months, including temporary store closures, at constant
exchange rates.
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CarrefourInvestor RelationsAnne-Sophie Lanaute and
Antoine ParisonTel: +33 (0)1 41 04 28 83orShareholder
RelationsTel: 0 805 902 902 (toll-free in France)orGroup
CommunicationTel: +33 (0)1 41 04 26 17
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