Carrefour Boosted by Brazil but Asian Shoppers Stay Away

10/20/2016 - 12h29

Carrefour stock rose yesterday as the second-biggest retailer by revenue reported robust sales in Brazil and improvements in its core French market over the third quarter.

The hypermarket group reported that like-for-like sales in Brazil, the company's second-largest market after France, rose 12.4 per cent year on year in the three months to the end of September 30, despite the recession in the country.

Carrefour benefited from the strong performance of its Atacadao cash-and-carry outlets as well as the fact that it sells mostly food in Brazil, making it less vulnerable to falling consumer spending.

The success helped it record a 1.1 per cent rise in sales to €21bn (US $23B), with the group also confirming its full-year guidance of €2.5bn (US $2.7B) operating profit.

Shares in the company were 4 per cent higher in afternoon trading in Paris.

Pierre-Jean Sivignon, chief financial officer, said: "This was a good third quarter. It confirms our good start to the year and the pursuit of the momentum initiated in 2012."

James Grzinic, analyst at Jefferies, pointed to Carrefour's "strong international progress" and confirmed a buy rating.

Difficult trading in France, Brazil and China over the past year has weighed on the company's stock. Its shares had been down 19 per cent this year ahead of the third-quarter results.

Carrefour reported a recovery in its French operations, with like-for-like sales rising 1.2 per cent, beating estimates and bouncing back from a 0.9 per cent decline in the second quarter.

Same-store sales at its French hypermarkets fell 1 per cent in the quarter, an improvement from a 3.1 per cent slide in the second quarter.

Asia remained a difficulty, with like-for-like sales falling 5 per cent and in China declining 7.8 per cent. This was better than the 9.3 per cent drop in the second quarter in China, however.

Carrefour is continuing to restructure operations in China, which have been hit by the economic growth slowdown.

Mr Sivignon said that the latest quarter had seen "several encouraging signs for food sales" in the country.

The Chinese market has proved tough for grocers given intensifying competition as well as food safety scandals that have tainted foreign brands.

Carrefour has provisional plans to launch a float of its Brazil operations next year in addition to Carmila, its real estate unit.

It yesterday reiterated earlier targets to invest up to €2.6bn (US $2.8B) this year and to boost free cash flow while maintaining net debt at constant levels compared with the end of 2015.