Sept. 1 (Bloomberg) -- Carrefour SA, the world's second- largest retailer, said profit fell 6.8 percent in the first half as the company slashed prices to revive demand in countries such as France and Italy.

Net income dropped to 687 million euros ($849 million) from 737 million euros a year earlier, Paris-based Carrefour said today in a statement on the Regulatory News Service. Analysts were expecting 675 million euros, according to the median of nine estimates gathered by Bloomberg.

Chairman Luc Vandevelde has extended a price-cutting program started by his predecessor to recover market share in France, where Carrefour makes about half its 73 billion euros in annual sales. Still, higher oil prices are prompting shoppers to cut back, meaning the retailer's discounts haven't been compensated for by an increase in volumes.

``You can't expect miracles,'' Jean-Noel Vieille, who oversees about $500 million at Aurel Leven in Paris, said before the report. ``The price cuts may eventually pay off, but it will more likely happen in 2006.'' Vieille said he recently reduced his holdings of Carrefour shares.

Carrefour shares have gained 7.5 percent this year on expectations that Vandevelde and Chief Executive Jose-Luis Duran, who were appointed in February, would revive growth.

Vieille, along with analysts, credits the new team for streamlining decision making, even if a significant turnaround has yet to take hold.

``They've started things moving, but the market may be too tough for the new price positioning to work quickly,'' he said.

French Superstores

French consumers pared spending in the second quarter by the most in more than eight years, the national statistics office Insee said Aug. 19. Most of the 300 million euros in price cuts Carrefour has planned for 2005 were probably made in the first half, according to a report by Ixis Securities.

Carrefour said July 12 that global sales climbed 4.6 percent in the first half, as revenue gained in Brazil and China. Total sales in France climbed 0.6 percent, helped by store openings.

The number of customer transactions at French superstores, or hypermarkets, rose for a second quarter, a sign customers are noticing the price cuts. Sales at the superstores rose 0.4 percent, though Carrefour estimates a decline of 0.9 percent when the effect of higher gasoline prices is stripped out.

Wal-Mart Stores Inc., based in Bentonville, Arkansas, is the world's largest retailer by sales.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

Last Updated: September 1, 2005 02:15 EDT