FRANCE: Carrefour Shares Fall After FY Profit Drop

Shares in Carrefour have fallen by nearly 5% this morning, after the group unveiled a sharp drop in profit in its home market and in emerging markets.

For the year, net sales edged down 0.1% to €70.2bn (excl. fuel), although they rose by 3.3% on a constant-currency basis, with organic sales up 3%. However, adjusted net profit was down 7.4% to €1.03bn, while recurring operating profit declined by 3.8% to €2.35bn.

The profit figures were primarily pulled down by weakness in France, where operating profit slid by 13.4% to €1.03bn and by a 9% fall to €653m in Emerging Markets (-7% constant-currency). This offset a 0.9% uptick in Latin America (+3.7% constant-currency) and a 25.5% jump in other European markets (+25.7% constant-currency).

Despite the results, CEO Georges Plassat noted: “Carrefour emerges from 2016 a stronger company. The increase in sales, for the fifth consecutive year, attests to the relevance of our multiformat and omnichannel model, which is now a reality in all our countries.”

Looking ahead, Plassat said that the group will continue to expand its various formats, and expects sales to grow by 3%-5% on a constant-currency basis. It will also invest €2.4bn on its operations, down slightly from last year.

NAM Implications:
  • Further proof that share price is driven by ROCE, in turn driven by Net Margin and Capital rotation
  • Unless a retailer can deliver faster stockturn in response to price reduction, then its share price falls…
  • Deep down, a stock market is not very interested in the back story (‘that’s why we have good management’), but more the financial results…