The excitement following the launch of Carrefour's much-anticipated Carrefour 2022 transformation plan has 'faded' following underwhelming full year results, a leading analyst has suggested.
Bruno Monteyne of Bernstein Research said that while there has been a 'short term upside' to the group's performance, Carrefour has a 'long and steep mountain to climb from here'.
Below Consensus
In a briefing note, Monteyne described the incremental news at the group's full year results as 'negative', noting that both France and Europe were below consensus expectations.
He described the group's Italian business as 'impaired', noting that further impairment and restructuring charges are likely during the coming year.
Elsewhere, Monteyne noted that 'tax rate expectations were brought up to 39% from previous expectations of mid 30s.
'It felt like the excitement from the CMD has faded away leaving the reality of a five-year turnaround to dawn', he added.
Short-Term Opportunity
Monteyne said that he believes Carrefour to offer a 'short-term trading opportunity', as the retailer's share price is likely to be 'swinging on sentiment rather than material facts, as there won't be many solid facts early on'.
He called on Carrefour's management to display 'excellence of execution: cash, volume and traffic stability, cost cutting … and proper new incentive scheme for management.'
Bernstein Research is reducing its estimates for Carrefour, saying it anticipates a margin decline in France for the coming year.
'We expect 10bps of margin decline in France next year driven by investment in the proposition ahead of savings,' Monteyne said.
Performance
In late February, Carrefour reported slowdown in full-year like-for-like sales, posting a full year sales increase of +1.6% in 2017, compared to +3.0% in 2016. Gross sales for the group were €88.24 billion.
In France, the focus of much of CEO Alexandre Bombard’s transformation plan, sales were down 0.1%.
Nonetheless, the CEO is bullish that the Carrefour 2022 strategy is the right path for the group. “The execution will be measured, monitored and will follow a precise timeline,” he told an analyst call.
“I’m well aware that you will assess our ability to deliver. That’s why over the past months, the teams have already been hard at work implementing the first steps of the Transformation Plan in each of its pillars.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
