Carrefour plans to save EUR4.5 billion by 2012

Speaking at his first financial analyst presentation since becoming CEO of Carrefour six months ago, Lars Olofsson has said the retailer is working on a transformation plan aimed at improving effectiveness and efficiency that will yield full benefits by the end of 2012. Carrefour plans to make EUR4.5 billion (USD5.9 billion) in savings by 2012 through cutting operating costs by EUR2.1 billion (USD2.7 billion), improving purchasing terms by EUR1 billion (USD1.3 billion) by centralising such activities in its four main European markets and sourcing nonfood items on a global level and reducing inventory times to boost profits. Efforts include centralising hypermarket administration, converting stores to the Carrefour banner and streamlining logistics. Implementing this transformation plan will require total capital expenditure of EUR500 million (EUR650 million) and will entail one-off expenses of approximately EUR1 billion (USD1.3 billion) between 2009-2012. Carrefour forecasts operating profit to fall 15% this year to EUR2.7-2.8 billion (USD3.5-3.6 billion) from EUR3.3 billion (USD4.8 billion) in 2008 after it reported profts EUR1 billion (USD1.3 billion) in the first half of the year, Olofsson said.

Carrefour is focusing on its G4 countries, the retailer's key Western European markets of France, Spain, Italy and Belgium, with a particular emphasis on its home turf, France. In France, Olofsson said that the Champion supermarkets converted to the Carrefour Market banner are growing market share and the retailer's new Carrefour discount range is performing strongly after the range captured roughly 4% of dry grocery volume in its first month. The retailer is expanding its multi-format single brand strategy to include smaller stores. Shopi neighbourhood stores will therefore be converted either into Carrefour Contact, for those located in rural locations, or Carrefour City in urban areas. With eight pilot stores currently in operation, 50 stores are planned by the end of the year. Concerning its ailing discount banner Ed, the retailer has announced that the Ed stores will be converted into Dia (new slogan is "Dia, You're going to love hard discount"), based on the Spanish Dia Market format, rolling out 20 Dia stores by the end of the year. However, not all the Ed stores will be converted into Dia, with some to be converted into Carrefour's neighbourhood format.

To address underperformance in Italy, Carrefour has closed two hypermarkets located in Rome and in Bari and decided to shut another four located in the Puglia region. The retailer is currently seeking a solution for six other hypermarkets located in Southern Italy. In the meantime, the retailer will concentrate its efforts in the north of the country. Carrefour is investing EUR40 million (USD52 million) on improving its price image and implementing a cost reduction program that should yield "significant" margin improvement in 2010. The conversion of a GS Iperstore in suburban Milan into Carrefour Market in November last year was the first time it had implemented its multi-format, single-banner strategy in the country. Some 40 stores are to be converted into Carrefour Market by the end of this year. Also, Carrefour is working on a turnaround plan in Belgium. A number of options are being considered, said Olofsson, including doing away with non-food products altogether. A commercial plan for the Belgian business will be defined by the end of the year, Olofsson said. To date, five GB supermarkets have been converted to Carrefour Market and the conversion will be finalised in 2010.

Finally, successful format Atacadão in Brazil, a mix of discount hypermarket and cash & carry offering 7,000 SKUs with many bulk buy offers will be exported into Colombia with the first opening planned at the beginning of 2010. Furthermore, Carrefour is exploring the opportunity for "hypercash" stores in France and in Spain at the end of 2010 or early 2011.

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