French retailer Carrefour cautious on 2018 as sales growth slows

By Dominique Vidalon

PARIS (Reuters) - Carrefour (CARR.PA) gave a cautious outlook for this year after sales growth slowed in the first quarter, with continued weakness in its core French market suggesting that the supermarket chain faces a long road to recovery.

Europe's largest retailer had in January announced plans to cut costs and jobs, boost e-commerce investment and seek a partnership in China in an effort to lift profit and revenue and help it to contend with competition from U.S. online retail giant Amazon (AMZN.O).

However, Carrefour reiterated on Wednesday that 2018 earnings would reflect negative currency exchange rates, notably for the Brazil real, and higher asset depreciation.

Pressed on when an improvement in the group's performance could be expected, finance chief Matthieu Malige told analysts only that there was "positive momentum" on cost savings, having earlier said it was difficult to predict second-quarter sales.

"This quarter further demonstrates that Carrefour's 2022 transformation plan is the right strategy," Malige said.

The group reported that sales at its French hypermarkets had turned negative again, citing bad weather, stiff competition and strikes during the Easter holiday, while sharp food deflation slowed sales growth in Brazil.

First-quarter sales reached 20.776 billion euros (18.1 billion pounds), slightly below the median estimate of 20.869 billion euros in a Reuters poll of analysts compiled by Inquiry Financial.

SLOWER GROWTH

Growth slowed to 0.4 percent year on year on a like-for-like basis excluding fuel and calendar effects, down from 1.9 percent year-on-year growth in the previous quarter.

The ThomsonReuters I/B/ES consensus analysts' forecast for 2018 earnings before interest and tax stands at 1.98 billion euros against 2.01 billion euros in 2017.

Carrefour's lacklustre performance comes as British counterpart Tesco (TSCO.L), which faced some of the same problems a few years ago, is reaping the rewards of its own revamp with a 28 percent jump in full-year profit.

Improving the French hypermarket business is a priority for new Carrefour boss Alexandre Bompard, who joined in July.

The goal has eluded several predecessors in the face of online competition from the likes of Amazon and discounting from rivals including unlisted Leclerc, which has overtaken Carrefour as France's top food retailer by market share.

In France, where Carrefour makes 47 percent of its sales, like-for-like revenue fell by 0.1 percent year on year, compared with 1.5 percent growth in the fourth quarter of 2017.

French hypermarket sales fell by 2.3 percent year on year, against 0.7 percent growth in the previous quarter.

In Brazil, Carrefour's second-largest market behind France, sales growth was slowed by food deflation. Carrefour listed its Brazilian business in July 2017.

In China, where the group faces fierce competition from local players and a buoyant online market, like-for-like sales fell by 6.6 percent from the same period a year earlier.

In Argentina, Carrefour has reached a deal for voluntary buyouts with workers as part of a crisis prevention plan that aims to end three years of losses, a union representative said on Wednesday.

(Reporting by Dominique Vidalon; Editing by David Goodman)