Carrefour Cuts 2011 Forecast Again as Sales Slump in Europe

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October 13, 2011, 4:29 AM EDT By Andrew Roberts

(Updates with shares in fifth paragraph.)

Oct. 13 (Bloomberg) -- Carrefour SA, the world’s second- largest retailer, lowered its 2011 profit forecast for the second time in three months, saying it now expects earnings to decline as much as 20 percent amid a slump in Europe.

“Faced with an increasingly uncertain environment, we are, as a matter of prudence, broadening the range of our 2011 current operating income guidance to a decline of 15 percent to 20 percent,” Chief Executive Officer Lars Olofsson said today. In August, the retailer forecast a drop of 15 percent.

Carrefour fell as much as 4.9 percent in Paris trading, the steepest drop in the French benchmark CAC Index. The company, based in Boulogne-Billancourt, France, is adjusting prices and remodeling its largest stores in a program dubbed “Reset,” aimed at countering domestic competition. Third-quarter like- for-like sales declined, in contrast to a 21 percent jump in revenue reported yesterday by rival Casino Guichard-Perrachon SA, which was helped by growth in Latin America and Asia.

“French sales were worse than expected, and the first signs of the Reset plan are visible as the company reduces promotions and loses traffic,” Jaime Vazquez, an analyst at Banco Santander in Madrid, said today by e-mail. “The commercial repositioning is impossible without pain.” Vazquez has a “hold” recommendation on the shares.

Fifth Forecast Cut

Carrefour shares dropped 89 cents to 17.03 euros as of 10:04 a.m., the day’s lowest price.

Today’s revision marked the fifth time in the past year the grocer has predicted lower profit. Third-quarter sales were 22.8 billion euros ($31.5 billion), up 0.3 percent from a year earlier at current exchange rates, Carrefour said today. Analysts had expected revenue of 22.9 billion euros. Sales at stores open a year or more fell 0.6 percent, excluding gasoline.

Risks to Europe’s economic outlook have increased as governments struggle to contain the sovereign-debt crisis, the European Commission said this week. France may enter a recession next year, as growth in the euro-area economy slows to 0.1 percent, Goldman Sachs Group Inc. predicted Oct. 3.

Sales at Carrefour stores open at least a year fell 2.3 percent in France and decreased 2.2 percent in the rest of western Europe, excluding gasoline and adjusted for calendar effects, the company said. French hypermarket sales on that basis fell 4.4 percent. Like-for-like food sales at French hypermarkets declined 2.6 percent, while non-food sales decreased by 9.6 percent.

Same-store sales in so-called European growth markets declined 4.1 percent, led by Greece, where sales fell 9.4 percent. In Latin America, where a proposal to merge Carrefour’s Brazilian unit with Brasileira de Distribuicao Grupo Pao de Acucar collapsed in July, same-store sales rose 7.4 percent. Asian like-for-like sales declined 1.6 percent.

--Editors: Tom Lavell, Paul Jarvis

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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