Carrefour aims for reinvention

01 February 2012

PARIS: Carrefour, the retailer, is seeking to overhaul its strategy around the world after failing to convince consumers or investors regarding its overall competitiveness.

Georges Plassat has just been appointed as Carrefour's fourth chief executive in the last eight years, and an official statement announced he was "well aware of the magnitude of the task ahead".

The firm's share price has fallen by 57% since 2008, and Bloomberg research found its margins and return on equity were the second lowest of 50 big food retailers, behind Sweden's Hakon Invest.

Similarly, Bloomberg revealed that, on a five-point scale, Carrefour currently achieves an average analyst recommendation score of 2.13, versus the figure of 3.94 logged by Wal-Mart.

Lars Olofsson, joined Carrefour as CEO in 2009 from Nestlé, but its share price has dropped by 24% since the start of that year, as the organisation struggles in France and many emerging markets.

Currently, Carrefour's superstores in France deliver 24% of its sales. It holds 21% of the local grocery market, compared with the 17% taken by LeClerc, which has set the target of taking the number one spot in two years' time.

Arnaud Joly, an analyst at CA Cheuvreux, argued Carrefour had to take "radical decisions", such as price cuts, although it would need to boost sales by €1.4bn to recoup a 2% reduction in this area.

"An option could be to implement a more aggressive policy, which means launching a price war," Joly said.

Analysts at Natixis also suggested the firm should consider the viability of the Carrefour Planet remodelled hypermarkets, enhance its price image and exploit the opportunities offered by the web.

Christian Devismes, an analyst at CM-CIC, added: "Carrefour has lost the confidence of its managers, staff, suppliers and shareholders. Appointing a respected retailer at its helm polishes up the image of the board, which some critics have accused of conducting a short-term financial strategy."

Natalie Berg, global research director at Planet Retail, the insights provider, suggested that reducing the size of many major outlets, stocking exclusive products and introducing more kiosks could all be equally sensible.

"There are a number of things they can do without the grotesquely expensive Carrefour Planet, which a lot of shoppers thought they were funding," Berg said. "They need a quick turnaround because it's a sinking retailer."

Data sourced from Bloomberg/Reuters; additional content by Warc staff