(News Bulletin 247) – The distributor published results in line with expectations for the first half. But the different regions experienced quite varied fortunes.

Carrefour is not immune to the gloom on the market this Thursday. The distributor’s shares fell 4.7% around 4:30 p.m. this Thursday, registering one of the biggest falls of a CAC 40 in the hard (-1.5%).

The distributor delivered half-year results the night before that were fairly in line with expectations. But the breakdown of profitability by region raised eyebrows among investors. The first half “raises a lot of questions,” Oddo BHF summarizes.

Over the first half of the year, Carrefour’s net sales excluding tax came to €40.62 billion, down 0.3% in published data and up 9.2% excluding exchange rate effects. The figure is slightly above the consensus of €40.54 billion, according to UBS.

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France’s profitability surprises

In France in particular, revenues fell by 2% in comparable data over the entire first half, and by 3.5% in the second quarter. France was penalized from April to June by the poor dynamics of hypermarkets (-5.5%) and supermarkets (-2.2%), while convenience stores held up (-0.6%).

“This development reflects the sharp slowdown in inflation, accentuated by Carrefour’s aggressive price investment policy, in a market context where volumes remain slightly negative,” the group explains. “Market share dynamics are gradually improving, with market share in volume stabilising during the second quarter and returning to growth in ‘P07’ (i.e. over the period from June 10 to July 17, Editor’s note)”, the company continues.

Carrefour’s overall current operating profit came to 743 million euros compared to 700 million euros a year earlier, a figure almost identical to the consensus (741 million euros according to Stifel).

In detail, “the good surprise” comes from France where the current operating result reached 286 million euros, up 6.2% over one year, and significantly above a consensus of 258 million euros.

“The surprise is significant, since the margin increased by 14 basis points (0.14 percentage points, editor’s note), which no one expected,” Oddo BHF emphasizes. This indicator benefited in France from “the increase in sales of Carrefour branded products, the transfer of stores to lease management and franchises and the continued improvement in the profitability of digital activities,” Carrefour indicated.

Weather and intense competition

On the other hand, Europe excluding France disappointed with a current operating result halved to 84 million euros, and significantly below the consensus of 135 million euros. Oddo BHF spoke of a “(very) bad surprise”.

“Western European markets were particularly penalized in the second quarter by unfavorable weather conditions, impacting certain product categories, notably non-food and seasonal products which generate traffic for the hypermarket format,” explained Carrefour.

The retailer faced “intense competitive pressures” in Poland and Italy, while profitability in Romania was weighed down by the costs of integrating recently acquired Cora stores. In Spain, current operating income was penalized by “the activity of the hypermarket format, linked to weather conditions and exposure to non-food, by its commercial investments as well as by the decline in the result of the financial services activity,” Carrefour said.

Current operating income in Latin America (Brazil, Argentina) came in slightly above expectations at 417 million euros. Carrefour benefited above all from a jump in Brazil (+46% over one year), with a current operating margin of 3.8% compared to 2.7% in the first half of 2023.

The company benefited from the conversion of Grupo Big stores, acquired in 2022, into its local brands. The company also achieved its synergies target of 2 billion Brazilian reals (330 million euros) linked to this acquisition ahead of schedule, with 2.3 billion reals generated over 18 months. The synergies target was therefore raised to 3 billion reals in 2025. “Brazil is shining,” summarizes Stifel.

At the end of this half-year, Carrefour confirmed its objectives for 2024, expecting growth in its gross operating profit compared to 2024 as well as its current operating profit. According to UBS and Oddo BHF, the group’s management also indicated that it was “comfortable” with the consensus for the current operating profit for 2024, namely 2.5 billion euros.

“While France seems to be doing well, contrary to market expectations, adverse factors in Europe are multiplying, and while some are temporary (Cora, weather), others could be more lasting (competition, financial services),” concludes Oddo BHF, which confirmed its “neutral” advice on the stock.