Carrefour Reports Smaller-Than-Estimated Drop in 2012 Profit

Carrefour SA (CA), France’s biggest retailer, posted a smaller-than-estimated fifth straight drop in annual profit and pledged to lift capital expenditure to stoke a revival in its domestic business.

Recurring operating income fell 2.6 percent to 2.14 billion euros ($2.78 billion), the Boulogne-Billancourt, France-based company said today. Analysts expected profit of 2.07 billion euros, according to the average of 10 estimates, in line with a forecast Carrefour made in January. The shares rose as much as 5.8 percent to the highest since July 2011.

The smaller-than-expected drop was “driven by a very strong performance in France,” said John Kershaw, an analyst at BNP Paribas in London. The “unwind of French mismanagement comes quicker and bigger than expected.”

Chief Executive Officer Georges Plassat plans to increase capital expenditure to as much as 2.3 billion euros this year as France’s largest retailer fights to win back domestic market share. His 2013 goals include improving price perception, refurbishing outlets, broadening the grocer’s multichannel offering and expanding in Latin America and Asia.

French profit growth accelerated in the second half, rising 8.4 percent and leading to a gain for the year of 3.5 percent. Carrefour, which gets almost half its sales from the country, can sustain its domestic margin without damaging competitiveness, Plassat said at a presentation in Paris today.

Photographer: Balint Porneczi/Bloomberg

A logo sits on the roof a Carrefour SA supermarket in Portet sur Garonne, near Toulouse. Close

A logo sits on the roof a Carrefour SA supermarket in Portet sur Garonne, near Toulouse.

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Photographer: Balint Porneczi/Bloomberg

A logo sits on the roof a Carrefour SA supermarket in Portet sur Garonne, near Toulouse.

No Improvement

The economic environment is unlikely to improve in 2013, the CEO said.

To help fund investment and focus the business on its main markets, Plassat has dispensed with assets in Colombia, Malaysia, Indonesia, Singapore and Greece in his first nine months at the helm. Carrefour, which has no plans to exit other countries, wants to be number one or two in the markets in which it operates as it decentralizes its approach to retailing, the CEO said.

The shares rose as much as 1.24 euros to 22.62 euros in Paris trading and were at 22.35 euros as of 2:33 p.m., extending this year’s gain to 16 percent.

In Turkey, the situation with Carrefour’s joint-venture partner remains the same and as majority owner, “it’s reasonable that we should devote some thinking to develop the appropriate strategy,” Plassat said.

In Poland, the market may consolidate in one or two years once Carrefour and three or four rivals have fought for the number two position, the CEO said. The grocer has no plans to spin off its Atacadao cash and carry unit in Brazil, Plassat said.

Photographer: Balint Porneczi/Bloomberg

Carrefour rose as much as 2.9 percent to 22 euros in Paris trading, extending this year’s gain to 14 percent. Close

Carrefour rose as much as 2.9 percent to 22 euros in Paris trading, extending this... Read More

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Photographer: Balint Porneczi/Bloomberg

Carrefour rose as much as 2.9 percent to 22 euros in Paris trading, extending this year’s gain to 14 percent.

Real Estate

The retailer would like to gradually extract value from its real estate assets, including the land and building rights it owns, over time, Chief Financial Officer Pierre-Jean Sivignon said earlier on a call with reporters. That won’t include selling off any property, Plassat said.

Carrefour, whose French hypermarkets are on average 30 percent bigger than its large outlets in Spain, Italy and Belgium, could shrink the sales area of some stores and rent the space to other businesses, according to Deutsche Bank analyst Sally Ronald.

The company revived and shelved a plan to spin off its property assets in 2011 amid opposition from shareholders and unions. The plan was to list a 25 percent stake in the French retailer’s real estate in Europe.

Carrefour proposed a dividend of 58 cents a share, payable in cash or stock, in line with the payout policy announced in March 2012, it said today.

Net debt improved by 2.6 billion euros to 4.32 billion euros, or 1.2 times earnings before interest, tax, depreciation and amortization, as of Dec. 31, Carrefour said.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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