Carrefour's Stringency Lifts Earnings -- Update

By Christina Passariello 

PARIS-- Carrefour SA on Wednesday showed signs that Chief Executive Georges Plassat's attempts to turn the French retailer around are bearing fruit, as it posted robust growth in full-year profit.

The company said net profit for 2013 increased more than sixfold to EUR949 million ($1.30 billion), from EUR150 million a year earlier. Operating profit grew 5.4% to EUR2.24 billion, though sales excluding taxes declined 1.0% to EUR74.89 billion.

"Carrefour recorded strong growth in a difficult environment," Chief Financial Officer Pierre-Jean Sivignon said on a conference call.

The French supercenter operator, which jockeys with Tesco PLC for the title of the world's No. 2 retailer behind Wal-Mart Stores Inc., posted its strongest sales growth in France and Spain in several years.

But earnings were dented by weak currencies abroad, especially in Latin America. Excluding foreign-exchange fluctuations, operating profit would have risen by 9.8% last year and sales 2%, Carrefour said.

The results were in line with J.P. Morgan's estimates, said analyst Jaime Vazquez. Though Carrefour's outlook contained "little new or unexpected," he saluted the company's plan to clean up its organization in its home market.

Carrefour shares were up 1.5% in early trading, making the company the leading gainer in Paris's blue-chip CAC-40 index.

Two years ago, Carrefour brought in Mr. Plassat to turn around a slumping business with yo-yoing prices and unwieldy costs. Last year, his first full year in command, he showed a steady hand in reducing price promotions, which cost the company a lot of money and did little to improve customer loyalty or Carrefour's price image. Instead, he focused on everyday low prices.

Mr. Plassat's strict control of costs raised Carrefour's operating margin in countries such as France and Spain last year. The company began implementing an overhaul of its supply chain, which could lead to further cost gains as it reduces wasted inventory.

At the same time, Mr. Plassat is spending some money. Last year, Carrefour began renovating stores in France to boost efficiency. The program will continue this year and spread to Spain and Italy, two of Carrefour's biggest European markets. Carrefour recently bought dozens of shopping centers that house its supercenters in France, Spain and Italy, a move that will allow it to accelerate its renovation program.

Carrefour is also doubling down on emerging markets. It opened 20 new supercenters in China last year, where competition has intensified and Carrefour's growth waned. The company said it will spend up to EUR2.5 billion this year on remodeling and opening stores.

"We will relaunch our expansion beyond the countries of China and Brazil, " Mr. Sivignon said. "The group continues to invest in its future and its growth."

Write to Christina Passariello at [e-mail]

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