UPDATE: Carrefour 2Q Sales Up On Weak Euro, Emerging Markets

French retail giant Carrefour SA (CA.FR) Thursday reported a 6.3% rise in second-quarter sales boosted by the weakening euro and strong sales in emerging countries, but said the overall economic environment would remain tough.

The retailer also signed a partnership with Chinese hypermarket retailer Baolongcang in a move to expand its presence in that fast-growing market.

The world's second-largest retailer after U.S.-based Wal-Mart Inc. (WMT) posted sales for the three months ended June 31 of EUR24.92 billion, compared with EUR23.96 billion a year earlier, in line with analysts' expectations of EUR24.94 billion.

"Carrefour is building on its momentum to achieve its 2010 objectives," Chief Executive Lars Olofsson said in a statement.

In the first six months of this year, the company's sales were up 5.9% to EUR48.88 billion, as improving business in France, Latin America and Asia offset a weaker performance in Europe, where sales were hit by the restructuring of its Belgian operations and economic woes in southern Europe.

Carrefour said it expects to report an underlying operating profit of around EUR3.1 billion in 2010, after reaching EUR1.1 billion in the first half.

France, which is Carrefour's main market and accounts for 40% of its total sales, showed encouraging signs in the second quarter, the company said.

Sales in southern Europe, though, have been hit by the lingering effects of the economic downturn and governments' austerity measures, CFO Pierre Bouchut told analysts on a conference call.

Bouchut said he expected the economic environment to remain tough and that Carrefour hoped to improve profitability in Spain through increased cost-cutting.

In Belgium, like-for-like sales fell 8.6% in the period, hurt by staff strikes, but should return to the group's average profitability within three years, Bouchut said.

Carrefour in February announced plans to restructure its operations in Belgium by cutting staff and shutting a number of stores, after struggling to hold ground against local competitors Delhaize Group (DEG) and Colruyt (COLR.BT).

The retailer will close 16 loss-making stores in the country at the end of July.

The positive effect of the weakening euro against most currencies accounted for around two thirds of sales growth in Latin America and more than half in Asia.

Carrefour said it was on track with its turnaround plan, as it focuses on sales growth and a cost-savings program after the economic slump hit retail consumption across Europe, particularly in France.

The company has trimmed its suppliers, cut prices and made wholesale changes to its store formats in an attempt to drum up sales amid the weak consumer environment.

In a separate statement, the company said it would acquire 51% of China's Baolongcang, one of the main hypermarket operators in the Hebei region near Beijing. Baolongcang operates 11 hypermarkets and recorded net sales of EUR113 million in 2009. No financial details were disclosed. Carrefour already operates 156 hypermarkets and 360 hard discount stores in China, where it expects to open 22 hypermarkets this year.

Carrefour shares closed Thursday 0.08% higher at EUR35.34.

-By Angeline Benoit, Dow Jones Newswires; [phone]; [e-mail]

(Elena Berton in Paris contributed to this report)

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