(News Bulletin 247) – The distribution group published a current operating margin a tad below expectations in 2023. But its cash generation has outpaced analysts and allows Carrefour to revise upwards its return to profit policy. shareholder.

If Carrefour, like its other rivals, is subject to strong competitive pressure from Leclerc in France, the group nevertheless passes the test of annual results without difficulty.

The only major distributor to be listed on the major Parisian indices, the creator of the hypermarket published its annual accounts on Tuesday, after the market closed.

And for now the company led by Alexandre Bompard is delighting investors: the stock rose 5.4% around 11:50 a.m. this Wednesday, marking the strongest increase in the CAC 40.

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France disappoints on growth

The results themselves show some roughness. In the fourth quarter, Carrefour recorded growth of 10.2% like-for-like

at 25.06 billion euros, an amount very slightly lower than expectations, according to Stifel. This strong growth is mainly due to mega-inflation in Argentina, which exceeds 250%. Carrefour thus generated revenues up 193% in the country on a comparable basis.

The notable point is that turnover in France disappoints, with growth of 1% against 2% expected by analysts on average, notes Stifel.

“In a market marked by the continued slowdown in food inflation and volumes still under pressure, sales are increasing in all formats. Growth is driven by food sales (+1.9% like-for-like). ), while non-food sales were down over the quarter (-5.8% like-for-like),” explains Carrefour.

Hypermarkets (+0.3%) and supermarkets (+0.6%) recorded timid growth, unlike local formats (Carrefour Express, City, Montagne, 8àHuit etc.) which grew by 3.2% over the trimester.

Slightly fair profitability

Conversely, France exceeds expectations in terms of profitability. Over the whole of 2023, this time, Carrefour generated a current operating profit of 988 million euros in France, when the consensus was at 954 million, according to Oddo BHF. The group’s margin thus increased from 2.2% in 2022 to 2.6% in 2023, which represents a fifth consecutive year of improvement.

France “will have at least benefited from its high price positioning throughout the year, which had cost it market share (with a decline of 0.6% in January according to Kantar), despite the start of repositioning in the fourth quarter”, analyzes Oddo BHF.

But Carrefour’s overall profitability was weighed down by Europe excluding France, with current operating income of 604 million euros, stable over one year, compared to 640 million euros expected by the consensus. Carrefour explains that it suffered in Poland where it recorded a significant decline in its profitability, “on a high 2022 base, marked by the consequences of the war in Ukraine”. Activity in Poland in 2022 was notably marked by the repercussions linked to the arrival of Ukrainian refugees in the country.

Ultimately, Carrefour’s current operating income in 2023 is a little disappointing. This indicator amounts to 2.264 billion euros, down 4.7% over one year in data and up 9.8% excluding currency effects, compared to an amount of 2.28 billion euros expected by analysts. .

An unexpected cash flow

If the results are therefore half-baked, the pleasant surprise comes from the cash generation. Carrefour blew away consensus by generating net free cash flow of 1.622 billion euros last year compared to 1.26 billion euros in 2022. Analysts expected cash generation of only 1.3 billion euros .

Oddo BHF evokes an “unexpected level”. “If a significant part comes from tight management of working capital requirements (+0.7 billion euros, very high level), particularly on non-food stocks, one-off effects (exceptional, Editor’s note) also come to boost it, such as tax credits (0.1 billion euros), less restructuring (0.1 billion euros), more asset sales (+0.1 billion euros). euros)”, deciphers the design office.

The group is ahead of its trajectory to achieve its 2026 target of achieving net free cash flow in excess of €1.7 billion.

This strong cash generation allows the group to deliver another pleasant surprise: the return to the shareholder. Certainly, Carrefour announced a share buyback package of 700 million euros, compared to 800 million euros a year ago, during the publication of the 2022 annual results. But, at the same time, the group is significantly increasing its dividend, at 87 cents per share for 2023, compared to 56 cents for 2022.

Oddo BHF calculates that the group will thus return approximately 1.3 billion euros of cash to its holders compared to 1.2 billion euros for 2022. This change in shareholder return policy, with more dividends , “reflects the group’s confidence in the recurrence of its results”, appreciates the design office. “The group’s friendly policy towards its shareholders is intensifying,” adds Stifel.

Especially since Carrefour has confirmed its commitment to annual growth in its dividend of at least 5% for “the coming years” on this increased basis.

Brazil as a tailwind in 2024

Regarding the current year, Carrefour declared during a conference with analysts that it planned to increase its gross operating profit (Ebitda) and its operating profit “with an increase in profit in France despite the expected continuation of investments in favor of competitiveness”, reports UBS.

“We confirm our constructive thesis (on Carrefour shares, Editor’s note) despite a certain caution for Europe (slowing inflation, strong competition, uncertain rebound in volumes) based on Brazil with positive news from “integration of Grupo Big (a Brazilian distributor bought in 2022 by Carrefour, Editor’s note)”, concludes Stifel, upon purchase on the file.

Oddo BHF, for its part, confirmed its “outperform” opinion due to the group’s historically low valuation, with the stock trading for less than 8 times expected profits over twelve months. But the research office adjusted its target to 18 euros compared to 20 euros previously. This is to take into account a sequence of current operating results “not as good, each year a country is less good than expected and France’s market shares remain under pressure (from Leclerc)”, he explains.

In a recent note, HSBC showed its very positive side, judging that the quality of the equity story (the story that a company tells the market to seduce it) “is not reflected in the current valuation”. “Carrefour is getting closer to the best in class” in the sector, estimated the Sino-British bank.

“For 2024, the group should reap the benefits of the ramp-up of the integration of Grupo Big in Brazil and strengthen its activity in France with the integration of Cora (60 Cora hypermarkets and 115 Match supermarkets, Editor’s note) and stores bought from Intermarché (around thirty stores, Editor’s note), argues HSBC.