Carrefour improves performance and signals a new phase

Carrier or headless chicken? None of the comparisons is flattering for Carrefour. But each one of them comes from a man who knows what he's talking about.
Georges Plassat, Chief Executive of the French group, took office in May last year, inheriting some of the more chaotic management structures and some of the most misguided investment plans among all 40 first-line companies that compose the CAC index. Weeks later, at the general meeting of shareholders, he compared the Carrefour a chicken who lost his head. It was a blunt hail by change, released by Plassat in inimitable style.
As for comparisons with heavy ships, the author is Thomas Barrack, billionaire founder of Colony Capital, an American investment House. As influential investors in Carrefour since 2007, Barrack spoke of heart when I once likened the task to reverse the course of the French group maneuvering an aircraft carrier.
Carrefour's share price is far below the € 45, level at which the Colony and Bernard Arnault, the luxury goods magnate, bought the network roles six years ago. But the price has risen about 50%, to € 24 since the arrival of Plassat, above the industry average. Higher profits in France, Carrefour's main market, were featured in the balance sheet of the first half. Another has been the reduction in net debt of € 9.6 billion to € 5.9 billion by June. Most investors recognize that Plassat is making progress in replacing the chicken head and reverse the direction of the aircraft carrier.
There are, however, some dissenting voices. They allege that Plassat has reduced the debt of Carrefour only through large-scale asset sale, which had the undesirable effect of reducing the group to a combination of narrow margin operations. William Mack, an analyst at Standard Poor 's, & coined the term "Brown bananas" to describe the remains of Carrefour Empire shrunk.
The picturesque expression captures something about transcontinental asset disposals. But does not do justice to the various fronts that Plassat is waging the battle for the future of Carrefour. Plassat, 64 years old, is one of the most experienced executives and independent spirit in the world of retail. His ambition is to transform the enterprise culture of Carrefour, the mobilization of financial resources and their image. Given the depths in which Carrefour had dipped, the progress will take time.
To some extent, the sale of Carrefour's assets in Greece, Turkey, the Middle East and Southeast Asia has changed the profile of the group. But, at the Zoo of retailers with global presence, Carrefour remains, under the skin, which has always been: an animal known to French. The network is still, after Wal-Mart, the world's second-largest retailer in sales. But this is, fundamentally, a French retailer, dependent on a hypermarket formula conceived in the years 60. The France accounts for 46% of total sales, and the rest of Europe, especially Italy and Spain, by 25%. Most of the revenue comes from the hypermarkets on the outskirts of cities rather than online sales or smaller stores and more conveniently located.
The challenge is to modernise the European operations of Carrefour and develop the located in Brazil and China, its two main markets. The long economic slowdown in southern Europe is producing symptoms of the syndrome "banana Brown" underperforming operations in Spain and, even weaker, in Italy. In France, Carrefour ceded the market leader for four months to Leclerc-although it has quickly resumed the position.
Wisely, Plassat dismantled the centralized management model of its predecessor, Lars Olofsson. He is encouraging stores managers to show initiative and give attention to the likes of local clients. And discarded the Carrefour Planet. Designed as a modern revamp of its hypermarkets, Carrefour Planet caused customers to stay with the perception that the products of the network were unjustifiably expensive. Plassat has not yet managed to revitalize the business in the segment of non-foods, which are under pressure from rivals specializing in electronics and fashion. But he's channeling the money from the sale of assets in carefully planned renovations French hypermarkets.
Investors are right to applaud the initiatives because hovering doubts about the planned expansions for outside Europe. In China, for example, will be that the economic pressures that have forced Tesco, in August, to seek a local partner will lead the largest Carrefour at the same way?
Europe, especially France, is the Centre of gravity of Carrefour, and it is in Europe that Plassat ideas are most needed. A total reversal of course certainly is not yet in sight, but always said that Plassat it would take three years. Therefore, may or June 2015. He deserves this time.