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Carrefour Shares Surge as Management Reassures Investors

Carrefour SA shares rose the most in more than five months after the world’s second-largest retailer reported sales growth that topped analysts’ estimates and boosted investor confidence that it can meet full-year profit expectations.

The stock advanced as much as 7.2 percent to 14.15 euros after the Boulogne-Billancourt, France-based company said revenue fell 0.3 percent to 21.7 billion euros ($26.6 billion) as all countries in Europe, excluding France, delivered a “satisfactory performance.” The average of six analysts’ estimates was 21.6 billion euros.

Carrefour, which has lowered its outlook for profit five times in the past two years, halted a 1.5 billion-euro plan to remodel some of its largest European stores in March. The company is lowering prices, putting more of its own products on shelves and adding pick-up points for online grocery orders as new Chief Executive Officer Georges Plassat bids to win back customers and boost profitability.

“It seems as though the downward spiral is not getting worse and there are some glimmers of hope,” Caroline Gulliver, an analyst at Espirito Santo in London who recommends buying Carrefour shares, said in a note. “Given that the management warned on profits ahead of last year’s second-quarter sales, we take this as a sign that perhaps profits are not too far out of line with expectations.”

Carrefour is comfortable with consensus estimates for full-year earnings before interest and tax of 2.03 billion euros to 2.09 billion euros, excluding Greece, a company official said.

Depressed Consumption

The shares were up 6.8 percent at 14.10 euros as of 11:47 a.m. Today’s intraday advance was the biggest since Jan. 26. The gain pared this year’s decline to 20 percent, still the third-worst performance in the CAC 40 Index.

“This is a straightforward statement and the fact it is not a profit warning may reassure,” Matthew Truman, an analyst at JPMorgan Chase & Co., said in a note. “All Carrefour’s challenges remain and all the question marks remain unanswered, however.” Truman has a neutral recommendation on the stock.

Excluding currency moves and gasoline, sales at stores open a year or more fell 1.3 percent, Carrefour said in a statement.

Non-domestic European same-store sales fell 3.7 percent on the same basis, hurt by “a depressed consumption environment” in the south of the region, Carrefour said. The figures were restated to exclude Greece, which the company agreed to sell to its franchise partner in the country last month.

France, Spain

While Carrefour will fight to increase market share in France and Spain, it will evaluate operations in markets where local competition is better placed, Plassat said last month. Sales trends are stabilizing in Spain, Chief Financial Officer Pierre-Jean Sivignon said on a conference call today. The company lost market share in the country.

In France, same-store sales fell 3.3 percent, excluding gasoline and currency moves, hurt by a decline in non-food sales, particularly for seasonal goods, Carrefour said. Food sales improved in the period, the grocer said.

“We believe that it is too early to play a potential turnaround story and we see tangible short-term uncertainties on the group’s ability to protect margins and operating cash flow,” said Arnaud Joly, an analyst at CA Cheuvreux.

Same-store French hypermarket sales decreased 5.7 percent, while supermarket sales fell 1.4 percent, both “in line with the expected effects of the action plan,” Carrefour said. The average of three analysts’ estimates was for a 5.3 percent drop in sales at the stores on the same basis. Carrefour had 125 so-called drives, or pick-up points, at the end of June.

In Latin America, same-store sales climbed 6.9 percent excluding currency moves and gasoline. In Asia, sales advanced 14 percent on a reported basis as Carrefour opened new stores in China. On a same-store basis, Asian sales decreased 2.3 percent, led by a 3.6 percent drop in China, excluding currency moves.

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