Carrefour to cut prices

16 March 2009

LEVALLOIS-PERRET, France: Carrefour, the world's second largest retailer, is planning to focus on reducing prices and increasing sales promotions in its home market of France, alongside pursuing international expansion, as it seeks to drive growth following a slowdown in profits in 2008.

It has been argued that discount retailers are best-placed to take advantage in the downturn, and that hypermarket chains will thus have to respond quickly to the increasingly challenging climate.

Carrefour, which operates in around 30 different countries, saw net profits fall by 45% to €1.27bn ($1.6bn; £1.1bn) last year, and its growth was particularly slow in more advanced markets like France, Italy, Spain and Belgium.

Its home market of France contributes around 44% of Carrefour's total revenues, but the company's ceo, Lars Olofsson, argues the "hypermarket is no longer king" in the country as a result of substantial changes in consumer behaviour.

As such, Carrefour plans to spend €600m in an attempt to increase its share of the French "hard discount" market from 2.7% to 5%, which is to be achieved by cutting prices and increasing the number of special offers available to consumers.

Olofsson argued that he was "not looking for a price war, but I don't exclude that there will be one."

He also said the company would try and increase the purchase rate of "non-food" products, which make up almost a third of Carrefour's sales in France, but have experienced a decline as consumers rein in their spending habits.

Emerging markets will be another area of focus, and around 25% of the company's total planned expansion this year is ear-marked to take place in growing markets such as Russia, where it will open its first store in 2010.

Data sourced from Financial Times; additional content by WARC staff