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    Carrefour profit fears over French stores


    Carrefour has been forced to issue what many analysts believe will be the precursor to a profit warning because of the problems at its French supermarket business.

    The French retailer, the world’s biggest supermarket chain after Walmart of the US, had already given an indication in May that its recovery plans were failing by parting company with the head of its domestic business.

    On Friday, Carrefour offered guidance that first-half operating income in France – which provides about 40 per cent of group sales – had fallen by 35 per cent.

    It said it was sticking with a full-year target of improving operating income but some analysts said this would almost certainly be revised.

    Citibank predicted that yearly earnings before interest and tax would fall by 4-5 per cent.

    The performance of its French stores has worsened because of fierce price competition from local rivals such as E Leclerc, belt-tightening by cash-strapped customers and a perceived lack of focus in its in-store promotions.

    It also failed to take advantage of the crucial Christmas trading period.

    The dismal French figures were disclosed as Lars Olofsson, chief executive, made another attempt to turn around the domestic business.

    He said he was putting it under the stewardship of Noel Prioux, a company stalwart who recently spent three years in charge of Carrefour’s operations in the equally difficult Spanish market.

    Recruiting an insider reverses Mr Olofsson’s previous decision to hire James McCann, a former Tesco executive, to run the French business – an appointment that lasted barely more than a year.

    “It is difficult to tell whether it will speed up the recovery plan, but an outsider would have had to assimilate into the company,” one investor said of the new appointment.

    As well as his domestic problems, Mr Olofsson is also having to placate shareholders.

    Colony Capital, an investment fund, and Bernard Arnault, one of France’s richest men – who control a combined 20 per cent of Carrefour voting rights – wanted to spin off part of its property assets, but that was shelved after other investors objected.

    Shareholders are due to vote on a separate proposal to spin off Dia, Carrefour’s Spanish discount chain, in what promises to be a tense meeting in Paris next week.

    Colony and Mr Arnault are eager to recover some of the value of their investment after first buying into Carrefour at about €50 a share in 2007. On Friday, the shares fell 2 per cent to €27.20.

    Mr Olofsson is pinning hopes on a revamp of 500 hypermarkets, including the creation of 241 “Carrefour Planets”, although Citi analysts called the project “disappointing” so far.

    Source : Financial Times