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Current Position:Home » News » Marketing & Retail » Retail » Topic

Carrefour, Metro show European recovery gaining traction

Zoom in font  Zoom out font Published: 2013-10-18  Views: 23
Core Tip: Quarterly sales at two of Europe's biggest retailers, Carrefour and Metro , showed turnaround efforts in their home markets starting to bear fruit and signs the region's long-suffering economy is at last on the mend.
Quarterly sales at two of Europe's biggest retailers, Carrefour and Metro , showed turnaround efforts in their home markets starting to bear fruit and signs the region's long-suffering economy is at last on the mend.

European store groups have had a torrid few years, hit by a squeeze on disposable incomes from a prolonged economic downturn and cut-throat competition from the rise of online shopping.

Carrefour, which has particularly suffered from its focus on out-of-town megastores, said on Thursday hypermarkets in its main French market had returned to underlying sales growth for the first time in 5-1/2 years, helped by its drive to cut costs, improve price competitiveness and revamp stores.

Germany's Metro, which has also been restructuring, said it was growing again in home market of Germany and was upbeat for the key Christmas period despite a hit to third-quarter sales from volatile foreign exchange rates.

As well as reflecting self-help measures, the results add to signs the euro zone economy is returning to life after years in the doldrums. Retail sales in the 17-country bloc rose more than expected in August.

However, the stronger performances at Carrefour and Metro contrast with results earlier this month from Britain's Tesco , where plunging profits in central and eastern Europe blew a new hole in its recovery plan.

Carrefour, the world's second-largest retailer by sales behind U.S. group Wal-Mart, said it made third-quarter sales of 21.11 billion euros ($28.48 billion), representing like-for-like growth of 3.1 percent, excluding fuel.

Same-store sales at its French hypermarkets rose 3 percent excluding fuel, the first increase since early 2008 and beating analyst forecasts for a rise of 1.5-2.7 percent.

"Overall these third-quarter numbers were very convincing and confirm that the company's recovery is on track," said Citi analyst Pradeep Pratti.

Carrefour shares, which trade at a premium to most rivals on 17.5 times forward earnings on hopes for its turnaround drive, were up 2 percent at 1000 GMT, after hitting a two and a half year high earlier in the day.

The stock has gained 42 percent so far this year - a boon to main shareholder Blue Capital, an alliance of France's richest man Bernard Arnault and private equity firm Colony Capital.

"Our price image improved further while store footfall improved for the second consecutive quarter," Chief Financial Officer Pierre-Jean Sivignon told analysts, adding that all store formats in France - which accounts for more than 40 percent of group sales - had achieved growth in the quarter.

Food sales at French hypermarkets grew for the fourth consecutive quarter driven by drinks and fresh products, while non-food sales were "more resilient" though still negative.

In March Carrefour announced plans to renovate 150 of its 220 French hypermarkets over three years and Sivignon said 36 stores had been remodeled so far this year.

He added analysts average forecast for 2013 earnings before interest and tax of around 2.19 billion euros ($2.95 billion) was "reasonable", provided Latin American currencies did not weaken versus the euro.

Elsewhere in Europe, sales in austerity-hit Spain were still negative but improving, with a like-for-like decline of 1.8 percent versus a drop of 2.6 percent the previous quarter.

Italy also showed an improvement, but mostly due to easier comparisons with the year-ago quarter.

Emerging markets were another bright spot for Carrefour, with like-for-like sales in China growing for the second consecutive quarter, up 1.1 percent after a 0.4 percent rise in the second quarter. Brazil achieved like-for-like growth of 8.8 percent after 7.1 percent in the second quarter.

GERMANY LEADS THE WAY

Metro, which runs cash and carries, supermarkets, department stores and Europe's biggest consumer electronics chain, reported third-quarter sales fell 2.1 percent to 15.5 billion euros, meeting analysts' average forecast.

However, sales grew 1.8 percent after stripping out the impact of currency effects from Russia, Turkey, India and Japan, as well as divestments like the sale of Real in eastern Europe, accelerating from a rise of just 0.1 percent in the first half.

Chief Executive Olaf Koch took direct control in March of the cash and carry business which accounts for almost half of group sales. The unit reported like-for-like sales growth in Europe and its Asia/Africa division, with Germany showing the strongest rise.

Retail sales in Europe's largest economy Germany, now waiting for a new government to be formed after an election victory by Chancellor Angela Merkel's party last month, rose in August for the first time in three months.

Metro's shares, which have risen sharply in recent weeks on expectations of a turnaround, were down 0.7 percent.

 
 
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