2 in comparable stores with a decline of 1

Display, year after year, growth in earnings per share (EPS) in addition of 15 is nothing. Carrefour still shunned by investors. And, far from abating, the disenchantment seems to grow. Over the past year, several offices of analysis, yet known so far for their unwavering support to the Group's strategy, volte.

The General company for purchase on the title throughout 2003 is thus passed to the sale of the day to the next in December 2003. Result, the title, which is dealt with, prior to its amalgamation with Promodès, in 1999, with a premium of 40 on the sector, has consumed all of his advance and is even today exceeded by Tesco, the British leader.

The overall health of the group is not in question. Second distributor world behind American Wal-Mart, present in 29 countries, Carrefour reached year last to achieve the highest operating margin in its history, at 4.6, and to find a level of return on capital employed (Roce) of 17.7, higher than that which prevailed before the merger. Noted A by Standard & Poor's, the group chaired by Daniel Bernard has reduced its debt of $ 1.1 billion in 2003 and reduced its debt ratio to 107. Homes lost in Latin America are in the process of resorption. In Europe, Spain and Belgium have managed their flipping...

Las, it is on the France that all eyes are on, and the performance of the hypermarkets. Inventor of the concept in 1963, Carrefour, which is still 27 of its total sales and about 40 of its operating income from this format to store in the Hexagon, momentum. Last year, sales declined by 0.2 in comparable stores, with a decline of 1.8 on the only fourth quarter. The trend is not new. As revealed the report 2002 distributor, turnover per square metre in the hypers integrated group fell from 8.110 euros in 2000 to 7.340 euros in 2001 and 6.213 euros in 2002, penalized by the decline in the number of visits. This sales lifelessness is problematic. "This is the strong domestic base and risk-taking that it generates which used to finance international development", says an analyst. And ensures that, year after year, the growth of profits.

New competitive landscape

However, this loss of attractiveness has its explanation. Initially concept discount offering "everything under one roof", it hyper is is gradually embourgeoisé, proposing, in stores more aesthetic and comfortable, the ranges of more complete products and sophisticated services. Rising real estate costs and staff which resulted was more than offset by the rise in prices, resulting in fine by gross margins soaring. "In ten years, the gross margin of hypers operators is passed an average of 17 to 22," explains Cédric Ducrocq, Dia Mart. For crossroads, it was 22.5 in 2003.

At the same time, the rise of the "category killers" (low price signs specializing in arts and crafts, gardening...) as well as the offensive of the food discounter focused on prices and called into question the current positioning of the hypers. Some competitors seem to have understood these changes earlier than crossroads. In Leclerc, where the offensive on the price is the selling point, the market share still grew last year.

A desired shock

Carrefour has therefore choice, not only to regain the lost ground, but especially for his role of leader and innovator, to operate a real shock. "It would lower prices, even sacrificing margin and return on capital employed for one or two years, to boost the growth of sales in comparable stores", says an analyst. This should add a job on the number of references, whose proliferation night efficiency in terms of inventory and logistics management, as has been done, with success, at Carrefour Spain.

The Group has the means. Deutsche Bank estimates Carrefour publishes any encrypted element on the profitability of each of its formats , the distributor could crop on the margin of its hypers 6.3, is more than 2.5 points higher than store Auchan and 3 points to those of Leclerc, estimated on a consolidated basis. Carrefour could reinvest the gains from improving its cost structure, which could still be lightened of EUR 500 million, still according to Deutsche Bank. The staff at Headquarters could be reduced, logistics and even optimized systems.

Strategic issues

On the treatment of shock expected by the market, the measures taken appear still timid. It is true that they are intended to allow the growth of the Roce, whereas 19 in 2004, against 17.7 in 2003, in an exhausting race performance with Wal-Mart. Also ratio of distribution costs on business, fallen Figure 16.3 in 2003, against 16.6 in 2002, not be reduced to 30 basis points per year. A cost savings, to constant sales, of 200,000 euros per year!

Another reserve: the launch of a range of products at low prices and a range of products international, supplied from a single provider for all of the cool and hypers in Europe, could prove counterproductive. "The multiplication of marks national, own, number one, international product likely to blur visibility while the launch of a range at low prices could harm the image of the Distributor", find a specialist. Profitability limited. "Face of discounters that offer only a few references (600 to 700 for Aldi and Lidl) and realize all of their turnover on these products, Carrefour will not also competitive conditions of purchase", judge another. It must also bear greater logistical and personnel costs.

Carrefour sin by excessive optimism felt able to boost sales of the hypers without sacrificing profitability or international expansion In any case, to this discrepancy between the speech of the Group and the expectations of the market, many now analysts claiming a flat discount of the strategy and the Organization of the group, only one capable, in their eyes, restore tone to the title.