France’s Carrefour will step up its expansion in e-commerce, open more discount stores and cut costs as part of a new strategy to accelerate its turnaround in an inflationary environment.
Europe’s largest grocery retailer, which also today announced a media joint venture with advertising giant Publicis, said it was aiming for €4bn in cost savings and net free cash flow of more than €1.7bn by 2026.
“Carrefour 2026 is a plan of acceleration and conquest,” said Chairman and Chief Executive Alexandre Bompard at the company’s investor day.
He stated that the plan will allow Carrefour to “improve its operating margin and maintain sustained growth in recurring operating income”.
To help customers contend with the soaring cost of living, Carrefour vowed to boost the share of own-label products in its food offering to 40% by 2026 compared to 33% in 2022. It will also accelerate the expansion of its discount format stores in its key French and Brazilian markets.
Carrefour will notably launch its first Atacadao Cash & Carry store in the Paris region in Autumn 2023. Other initiatives include a simplified offering in its hypermarkets, reducing the product range by 20%.
As a result, Carrefour said it was raising its annual investment target to €2bn from €1.7bn previously.
Bompard said that cost savings will come from simplifying the group’s organisation, mutualising support and buying operations in Europe, which will lead to “significant” staff reductions at the group’s headquarters.
When asked if Carrefour, which has exited non-profitable markets of China and Taiwan, was planning to leave more countries, Bompard said: “Our geographic footprint is the right one”.
Bompard, who took the helm in July 2017, was reappointed in May 2021 for another three years. He faces the challenge of delivering the second leg of the group’s turnaround in an inflationary environment without the extra financial resources that would have been on hand if two planned tie-ups last year had not failed – one with Canada’s Alimentation Couche-Tard and another with France’s Auchan.
The new plan builds on targets announced in November 2021 to triple e-commerce gross merchandise value (GMV) – the total value of merchandise sold – to €10bn in 2026, contributing an extra €200m to recurring operating income in 2026 compared with 2021 as Carrefour looks to stay ahead of Amazon on grocery delivery.
The partnership with Publicis in the fast-growing retail media market will take the form of a joint venture in which Carrefour will hold a 51% stake.
The two firms plan to leverage their leadership positions in their respective industries, aiming to bring to Europe and Latin America the same scale and connectivity that is enabling the retail media boom in the US.
A statement said: “By combining Publicis’ advanced technologies, ‘CitrusAd powered by Epsilon’, with Carrefour Links’ retail media knowledge and expertise, this new venture will build a comprehensive media player that addresses the entire Retail Media value chain. It will span technology for inventory creation and data sharing for merchants to the full commercialization of media and data solutions for advertisers, backed directly by merchant transactions, across Continental Europe, Brazil and Argentina.”
Bompard commented: “We understood very early on that our data had tremendous value potential. We were one of the first retailers to launch retail media. Last year, we accelerated by creating Carrefour Links.
“Today, we want to go further and beyond the limits of our current model. We are going to create an alliance with an industry expert, the Publicis Groupe, to change three two things: first, we will put tech at the heart of our model, second, we will go up in the value chain, by creating retail media solutions by ourselves, and third, we will conquer new markets, both in continental Europe and in Brazil. With this alliance, our digital transformation takes on a new dimension and allows us to access a new market with tremendous growth.”
