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Carrefour's CEO faces pressure as turnaround seen too slow

Carrefour shares have plunged 40% since Mr Bompard joined as chief executive officer on July 18 last year. Last week alone, the stock dropped 8.6%, closing Friday at a six-year low.


ALEXANDRE Bompard is one year into the job of trying to turn around Carrefour SA, and investors are more pessimistic than ever that he can revive France's biggest retailer.

Carrefour shares have plunged 40 per cent since Mr Bompard joined as chief executive officer on July 18 last year. Last week alone, the stock dropped 8.6 per cent, closing Friday at a six-year low, as several brokerages published notes cautioning that Carrefour's first-half results are likely to bring more disappointments. The company plans to report earnings on July 26.

Investors were optimistic when he was hired because he had won acclaim for a digitally-savvy revamp of Groupe Fnac SA, including a merger with appliance retailer Darty Plc that saved the French books-and-electronics chain from going the way of US bookseller Borders and electronics retailer RadioShack Corp, both of which went bankrupt.

At Carrefour, the 45-year-old executive has set out a two billion-euro (S$3.13 billion) cost-cutting plan that will eliminate 2,400 jobs, launched a partnership with Chinese social media giant Tencent Holdings Ltd and formed a purchasing alliance with Britain's Tesco Plc. He's moved to bolster Carrefour's e-commerce operations and reduce its dependence on suburban big-box stores, while promoting more organic and own-brand groceries to fend off Inc and local rival Casino Guichard-Perrachon SA.

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Still, there's no evidence yet that Mr Bompard has managed to reverse Carrefour's market share losses.

"A credible plan has yet to take hold," Nick Coulter, an analyst at Citigroup Global Markets Ltd, who has a "buy" recommendation on the stock, wrote in a note to clients Friday. The retailer's recovery plan for its French hypermarkets "is not convincing", Kepler Cheuvreux analyst Fabienne Caron wrote on Wednesday. She has the equivalent of a "sell" rating on the shares.

Mr Bompard dubbed his strategy "Carrefour 2022", indicating he doesn't expect a quick turnaround. While it was well-received by analysts, it probably won't begin to show results when earnings are announced this month. Sales in the first half probably fell slightly, based on the average analyst estimate compiled by Bloomberg.

The share price decline reflects investors' concern about the retail industry broadly, Carrefour said. Indeed, shares of Casino have fallen just as much as Carrefour's in the past year.

"There is a great amount of scepticism regarding the sector which is reflected in the company's share price," Carrefour said in a statement. "This is fed by very, very strong intensity of promotional activity in France. On the contrary, there is a consensus that Carrefour's transformation plan is going in the right direction and is being rolled out quickly."

The company hasn't communicated to the market any results since the announcement of the strategic plan in January, Carrefour said.

Some analysts are betting the pessimism is overdone.

"The strategy is moving in the right direction," Societe Generale analyst Arnaud Joly, who has a "buy" recommendation on the stock, wrote in a note to clients on Friday.

"At the current share price, we think the market fails to account for any potential turnaround." BLOOMBERG

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