Carrefour steps up e-commerce push, chases deal in China (updated)

SRP Groupe SA

23/01/2018 09:45

* Potential investment by Tencent and Yonghui in Carrefour 
China 
    * Voluntary redundancy offered to 2,400 employees 
    * Investments in digital of 2.8 bln euros by 2022 
 
 (Adds CEO quote, analyst, share price, details) 
    By Dominique Vidalon 
    PARIS, Jan 23 (Reuters) - Carrefour's  CARR.PA  new chief 
executive promised to slash costs, step up e-commerce investment 
in the face of competition from Amazon  AMZN.O  and open up 
Carrefour China to local investors, sending its shares higher on 
Tuesday.  
    Alexandre Bompard, at the helm only since July and tasked 
with boosting cash flow, promised to invest 2.8 billion euros 
($3.4 billion) in digital commerce by 2022, six times its 
current investment, as Carrefour plays catch-up in online 
retail. 
    Under pressure to lift profits, Bompard also announced cost 
savings of 2 billion euros by 2020, including a voluntary 
redundancy plan for 2,400 employees at its French head office. 
    "We must revamp our model by simplifying our organisation, 
opening ourselves up to partnerships, improving our operational 
efficiency... (and) building an efficient omnichannel model," 
Bompard said in a statement. 
    Carrefour shares leapt 6.3 percent, the biggest one-day gain 
since October 2015, as investors cheered the five-year strategic 
plan's focus on investing in online and competitiveness. 
    Carrefour has spent years trying to reduce its reliance on 
hypermarkets, particularly in France, a model that once drove 
its bricks-and-mortar retail business but which has come under 
crushing pressure from digital commerce and the rise of online 
giants such as Amazon  AMZN.O . 
    Former Fnac executive Bompard unveiled the plan after 
Carrefour said last week that its 2017 operating profit could 
fall by 15 percent amid weak sales. This marked its second 
profit warning in six months.  urn:newsml:reuters.com:*:nL8N1PC5KN 
    The retailer, the world's largest after Wal-Mart  WMT.N , 
with more than 380,000 employees, said it was targeting a 20 
percent market share in food e-commerce in France by 2022. 
    Carrefour's online sales accounted for just 1.7 percent of 
its total French food sales in 2016, while more digital-savvy 
rival Leclerc managed 8 percent, according to Bernstein 
analysts.  
     
    CHINA PARTNERSHIP 
    In China, Carrefour remains loss-making amid fierce 
competition from local players and a buoyant online market. 
    In response, Bompard announced the possible acquisition of a 
stake in Carrefour China by Internet giant Tencent  0700.HK  and 
local retailer Yonghui  601933.SS . Carrefour would remain the 
largest shareholder of Carrefour China. 
    "While some will be disappointed not to see an outright sale 
of China, these are both strong strategic partners and we would 
argue give the group the best possible ability to turn the 
business around," brokerage Bernstein said in a briefing note. 
    Amazon's acquisition of U.S. food retail chain Whole Foods 
has fuelled speculation that the U.S. online group is looking to 
crack the European market next. It has held exploratory talks 
with some of Carrefour's rivals, the companies have confirmed. 
    Carrefour's five-year plan was welcomed by investors and 
analysts who had wanted the retailer to make further moves into 
e-commerce after it acquired a stake in online fashion retailer 
Showroomprive.com  SRPG.PA  this month.  urn:newsml:reuters.com:*:nL8N1P71PR 
    It is the largest private sector employer in France, where 
its weak performance have weighed on group profitability and 
performance of its shares. France accounts for 44 percent of the 
operating profits. 
    Targeting 1 million additional fresh food customers by 2022, 
Carrefour said it would accelerate growth in supermarkets and 
convenience stores and improving the efficiency of its 
hypermarkets, including by reducing sales areas. 
    No hypermarket closures were planned, it said. 
    Bompard's plan to shed 2,400 jobs out of a total French HQ 
workforce of 10,500 could set the chief executive on a collision 
course with France's muscular trade unions, including Force 
Ouvriere, which has already called for a walkout on Feb. 8.     
    Britain's supermarket group Tesco  TSCO.L  said on Monday it 
will cut a net 800 jobs from its UK business to simplify 
operations and achieve targeted cost savings.  urn:newsml:reuters.com:*:nL8N1PH57T 
 ($1 = 0.8165 euros) 
     
 
 (Reporting by Dominique Vidalon; additional reporting by Sudip 
Kar-Gupta; Writing by Richard Lough; Editing by Keith Weir) 
 ((dominique.vidalon@thomsonreuters.com; +33149495432; Reuters 
Messaging: dominique.vidalon.reuters.com@reuters.net)) 
 
Keywords: CARREFOUR STRATEGY/