Once a retail empire, Carrefour struggles to win back investors
Since then, Carrefour's fortunes have waned as the chain struggles to compete in its cut-throat home market and it retreats from overseas. Its business is worth a fraction of LVMH's, the current global flag-bearer for French business, and Chairman and Chief Executive Officer Alexandre Bompard is struggling to convince investors that he can propel it through a transformation.
Carrefour shares hit a 32-year low in June after JPMorgan Chase & Co. placed the stock on negative catalyst watch and downgraded its estimates. Bompard responded by offloading flagging operations in Italy, and a better-than-expected sales print contributed to an uptick in shares.
But that was quickly replaced by concerns over the grocer's future after years of stagnating profits. Investors are still asking the same question of Bompard from when he took the helm eight years ago - can he spur growth at Carrefour, when many previous CEOs have failed?
Plenty of observers bet he can't. Carrefour is among the most-shorted grocery chains in Europe, with shares out on loan at 6% of the free float as of July 24, according to data from S&P Global Market Intelligence. The stock is still down about 10% this year, and in the last two decades it's the only major European grocer to provide a negative return.
'We are far from assuming this turnaround with the trends we see and in the context of the mixed track record of the company,' JPMorgan analyst Borja Olcese said in a note after the earnings last week.
Despite the poor share performance, Bompard, who answers to shareholders including the billionaire Moulin family heirs and the descendants of late Brazilian businessman Abilio Diniz, is sticking around with the board intending to renew his mandate next year.
Global Footprint
Carrefour Chief Financial Officer Matthieu Malige said a strategic review still has plenty of scope and the company isn't ruling out selling its Polish business, which some analysts say is loss-making.
'There are many situations including the one in Poland that are being reviewed,' he said in an interview this week.
The sale in Italy confirmed how little value was left in Carrefour's fifth biggest market, with the grocer paying the new owner, Italian food company NewPrinces SpA, €240 million ($277 million) to take it off its hands. Carrefour's expansion since the 1970s left it with a footprint in more than 40 countries, many of them underperforming.
Part of the company's challenges lies in its dependence on the hypermarkets that sell everything from fresh fruit to clothes and washing machines at a time when shoppers prefer online purchases, especially for non-food items.
Home and electrical products account for about 10% of sales, while for French rival Leclerc the category is 5% and for British supermarket J Sainsbury Plc it's 3%, according to a Bernstein report. Last year Carrefour acquired 55 more hypermarkets, raising concerns for some analysts about Bompard's strategy.
'They still need to fix the core basics of being a food retailer in terms of price and format and product,' said William Woods, an analyst at Bernstein.
Challenges at Home
France is particularly difficult to operate in as the majority of food retailers are private or cooperatives, which aren't bound by the same shareholder expectations.
'You're fighting against independent players who are playing a totally different game, can make it with smaller margins and have different ways to make a living, such as as renting part of their real estate into malls,' said Gilles Guibout, head of European equities at AXA IM.
Unlike other countries, the French government polices relationships with suppliers to ensure prices are kept low for consumers while pushing retailers to pay more to farmers.
Other major grocers have boosted their business through online delivery but Carrefour has been slower to this trend. It also doesn't have a tight operating model to allow it to compete aggressively on price with the likes of market leader Leclerc, according to analysts.
Still, the picture is looking brighter as consumers recover from a period of hyperinflation and restore their purchasing power, Carrefour's Malige said. Profitability is increasing, online delivery is rapidly growing and a strategy to switch hypermarkets into a franchise model is bearing fruit, he added.
Regional Deals
Carrefour recently entered a buying alliance with France's fourth-biggest grocer, Cooperative U, to cut costs in Europe, but it's unclear how effective this will be after similar deals including with UK's Tesco Plc were shortlived.
Meanwhile, failed mergers have been a thorn in the side of Bompard. The French government effectively blocked a $20 billion takeover proposal by Canadian retailer Alimentation Couche-Tard Inc. in 2021. Rival French grocer Auchan considered a potential offer multiple times, though a deal has never materialized.
Bernard Arnault, the billionaire CEO of LVMH Moët Hennessy Louis Vuitton SE, sold off his remaining 5.7% stake in Carrefour after the Couche-Tard talks collapsed. It was an embarrassment for Arnault who sold at a €16 per share level after taking a holding in 2007, when prices were around €47 a share.
Shrinking Value
Carrefour's market value has shrunk to around €9 billion, which is less than the deal it struck to takeover rival Promodes in 1999 when it was in peak expansion mode among the world's largest retailers. As recently as 2009, Carrefour was just as valuable as LVMH, but the luxury giant now is worth €231 billion.
Despite the board's backing for Bompard, some investors are voicing discontent. Activist Whitelight held a short position in the grocer last year but is now long, betting on a new takeover.
'What we need is a turnaround CEO who can really focus on raising the profitability of supermarkets' and 'take a look, asset by asset, on the hypermarkets,' said Kevin Romanteau, Whitelight Capital's founder.
--With assistance from Lisa Pham, James Cone and Tara Patel.
More stories like this are available on bloomberg.com
©2025 Bloomberg L.P.
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