Earnings Release • Jan 22, 2019
Earnings Release
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Alexandre Bompard, Chairman and Chief Executive Officer, declared: "Carrefour's solid fourth-quarter performance confirms the full-year 2018 dynamic. Since the launch of the Carrefour 2022 plan one year ago, we have set in motion an unprecedented transformation of our Group. In 2018, we reviewed and simplified our organizations, improved our efficiency, entered into major partnerships and implemented our new growth model. This year also saw the roll-out of our new ambition to lead the food transition, driven by our global Act For Food program. Through the sum of its commitments and concrete initiatives, Carrefour has become the leader in healthy eating. I commend the work and commitment of all the teams to transform our group and set it on the road to success."
| Fourth quarter 2018 | Full-year 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Total variation(3) | Total variation(3) | ||||||||
| Sales inc. VAT (€m) |
LFL(1) | At current exchange rates |
At constant exchange rates |
Sales inc. VAT (€m) |
LFL(1) | At current exchange rates +1.1% -0.4% -12.8% -7.3% -2.8% -0.3% -3.1% |
At constant exchange rates |
||
| France | 10,600 | -0.1% | +0.5% | +0.5% | 39,903 | +0.3% | +1.1% | ||
| Europe | 6,439 | -1.7% | -1.1% | -0.9% | 23,467 | -1.6% | -0.2% | ||
| Latin America (pre-IAS 29) |
4,259 | +12.9% | -8.9% | +15.4% | 15,713 | +8.9% | +11.5% | ||
| Asia | 1,340 | -4.1% | -6.9% | -6.2% | 6 080 | -3.7% | -4.4% | ||
| Group (pre-IAS 29) | 22,638 | +1.9% | -2.3% | +2.7% | 85,164 | +1.4% | +2.5% | ||
| IAS 29 (4) | +344 | n.a. | +1.5% | n.a. | -248 | n.a. | n.a. | ||
| Group (post-IAS 29) | 22,982 | +1.9% | -0.8% | n.a. | 84,916 | +1.4% | n.a. |
Notes: (1) excluding petrol and calendar effects and at constant exchange rates; (2) estimated, unaudited figures, pre-IAS 29; (3) variations presented in relation to the restated 2017 sales, i.e. excluding sales of ex-Dia stores that exited the Group's scope; (4) hyperinflation and currency effect in Argentina
The international Act For Food campaign, launched in September 2018 in stores and in the media, has allowed Carrefour to become the leader in the food transition with all its stakeholders (customers, suppliers, farmers, NGOs, public authorities, etc...).
Very concrete initiatives have been launched, notably:
This year, the Group accelerated its growth in organic products, with sales of €1.8bn vs about €1.3bn in 2017, a first step towards achieving its target of €5bn in 2022.
Carrefour has begun a major revamp of its in-store commercial offer. Assortments and services are being reassessed to better meet consumer expectations:
Commercial investments aiming at bolstering price competitiveness were initiated as early as Q1.
In line with previous commercial initiatives, Carrefour hypermarkets were among the first, in November, to mobilize in favor of French purchasing power with the "Fuel Days", two exceptional weeks during which gasoline was sold in France at cost
Carrefour continues to modernize its stores and its offer to provide a better shopping experience. This notably takes the form of the development of new in-store commercial concepts and sales area reallocation.
In addition, Carrefour is accelerating the roll-out of new technologies within its stores, thus leveraging the "retailtech" trend through strategic partnerships with, for example, Google or Tencent.
The digital strategy and an omnichannel food offer were rolled out in all Group countries in 2018, generating online food sales growth of more than 30% in Q4:
A culture of operational efficiency and financial discipline has been implemented, with the profound transformation of organizations, purchasing alliances, a dynamic of industrialized processes and cost optimization and enhanced selectivity and productivity of investments
Carrefour has adopted a more industrialized and efficient approach to all its operational processes and its expenditures:
During the fourth quarter, the operational implementation of purchasing alliances with Tesco and Système U began:
Thus, in all countries, Carrefour is implementing a cost-reduction dynamic while strengthening the selectivity and productivity of its investments.
In 2018, Carrefour issued bonds in the amount of approximately €1.8bn. These operations enabled it to maintain an average maturity of 3.6 years and thus significantly improve its liquidity over the medium term.
The success of these operations, which were largely oversubscribed, attests to the great confidence of fixedincome investors in Carrefour's signature.
In addition, Carrefour has undrawn credit facilities with its banking partners in the amount of €3.9bn maturing in 2022 and 2023.
The Carrefour Group thus benefits from a solid balance sheet. This is an important asset in the context of rapid changes in food retail.
The Group is rated BBB+ negative outlook by Standard & Poor's and Baa1 stable outlook by Moody's.
In the fourth quarter of 2018, Carrefour's sales amounted to €22,638m, up 2.7% at constant exchange rates. After taking into account an unfavorable currency effect of -5.0%, mainly due to the depreciation of the Brazilian Real and the Argentine Peso, sales decreased by -2.3% at current exchange rates.
On a like-for-like basis, the variation in sales amounted to +1.9% over the quarter, compared to +1.1% over the first nine months. Total growth at constant exchange rates (+2.7%) also includes a calendar effect (+0.3%), the contribution of gasoline sales (+0.4%), as well as the effect of openings (+1.2%) and closures (-1.1%).
In a more complex and less buoyant market environment in Q4, France's like-for-like sales were broadly stable at -0.1%, despite the impact of the "yellow vests" movement, which mainly affected hypermarkets (-2.2% LFL) and non-food. France again posted a good performance in food, with slight growth, including stable food sales in hypermarkets and significant growth in other formats. The growth momentum of organic products and ecommerce is solid.
Markets remain difficult in Europe (-1.7% LFL):
Momentum in Latin America (+12.9% LFL) accelerated sharply compared to the first nine months (+7.5% LFL), both in Brazil and Argentina.
In Brazil, Carrefour posted significant growth of +6.2% on a like-for-like basis and +10.7% in organic terms, driven by good commercial performance, expansion and development of e-commerce. The market is also benefiting from the return of food inflation since June.
In Argentina (+39.0% LFL), the great success of commercial initiatives was reflected in an acceleration of the growth of traffic and volumes, despite a complex macroeconomic context.
Asia was down by -4.1% LFL. In China (-6.2% LFL), in a complex environment, Carrefour is continuing to adapt its commercial model: Sales area reduction and reallocation, development of fresh and digital, logistics integration and cost reductions. E-commerce grew strongly in the fourth quarter. In Taiwan, sales momentum remained solid (+1.1% LFL).
The first achievements, in a complex macroeconomic context, reinforce management's confidence in the relevance of the Carrefour 2022 plan that supports the group's ambition: to be the leader in the food transition for all.
The group thus confirms its targets, and in particular:
In addition, the Group's 2018 Recurring Operating Income is expected at around €1,930m (estimated figure, unaudited and excluding the impact of IAS 29), with a negative currency effect estimated at €160m. As a result, 2018 ROI is expected to be up by nearly €85m at constant exchange rates compared to the 2017 reported ROI (of which €36m in H1).
Investor relations Selma Bekhechi and Antoine Parison Tel : +33 (0)1 64 50 79 81 Group communication Tel : +33 (0)1 58 47 88 80
Shareholder relations Tel : 0 805 902 902 (toll-free in France)
In Argentina, the cumulative inflation rate over the last three years is greater than 100%, according to a combination of indices used to measure the country's inflation (inflation of wholesale prices and consumer prices having exceeded the 100% threshold), and no significant decrease in inflation is expected in 2019 in a context in which, moreover, the Argentine peso has depreciated.
As a result, the criteria of the IAS 29 norm are fulfilled and according to a consensus shared by the AMF and ESMA, Argentina is considered a hyperinflationary economy within the meaning of IFRS as of July 1, 2018. Thus, the terms of IAS 29 relating to financial reporting in hyperinflationary economies become applicable from January 1st, 2018 as if Argentina had always been in hyperinflation and the comparative amounts presented in 2017 are not restated.
The impact on 2018 revenue is presented in the table below:
| Sales inc. VAT (€m) |
2017(1) | LFL(2) | Calendar effect |
Scope effect |
Petrol effect |
2018 at constant exchange rates |
Currencies | 2018 at current exchange rates(3) |
IAS 29(4) | 2018 at current exchange rates post IAS 29 |
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | 21,144 | +0.4% | +1.3% | +0.8% | +0.1% | 21 700 | -5.1% | 20,626 | -0.0% | 20,625 |
| Q2 | 21,595 | +0.9% | -1.1% | +0.6% | +1.3% | 21,977 | -5.4% | 20,813 | -1.2% | 20,563 |
| Q3 | 21,701 | +2.1% | -1.0% | +0.3% | +1.3% | 22,291 | -5.5% | 21,087 | -1.6% | 20,746 |
| Q4 | 23,165 | +1.9% | +0.3% | +0.1% | +0.4% | 23,798 | -5.0% | 22,638 | +1.5% | 22,982 |
| Full year | 87,605 | +1.4% | -0.1% | +0.4% | +0.8% | 89,766 | -5.3% | 85,164 | -0.3% | 84,916 |
Notes: (1) restated; (2) excluding petrol and calendar effects and at constant exchange rates; (3) corresponds to reported figures for Q1, Q2 and Q3; (4) hyperinflation and currencies
The impact on 2018 recurring operating income is negative and estimated at around €(30)m. In addition, the consideration for these restatements will be recognized in a specific line of the income statement (in financial income). The application of IAS 29 should therefore have a favorable impact estimated at around €20m on 2018 net income.
Impacts on other financial aggregates, such as free cash flow or equity, are being evaluated and will be disclosed when the 2018 annual results are published.
| Sales | Variation ex petrol ex calendar |
Total variation inc. petrol | ||||
|---|---|---|---|---|---|---|
| inc. VAT (€m) |
LFL | Organic | at current exchange rates |
at constant exchange rates |
||
| France | 10,600 | -0.1% | -1.5% | +0.5% | +0.5% | |
| Hypermarkets | 5,731 | -2.2% | -3.1% | -0.5% | -0.5% | |
| Supermarkets | 3,336 | +1.9% | -0.5% | +1.0% | +1.0% | |
| Convenience/other formats | 1,533 | +3.1% | +2.9% | +3.3% | +3.3% | |
| Other countries | 12,037 | +3.5% | +4.6% | -4.6% | +4.6% | |
| Other European countries | 6,439 | -1.7% | -1.5% | -1.1% | -0.9% | |
| Spain | 2,700 | -1.4% | -1.1% | +0.7% | +0.7% | |
| Italy | 1,369 | -4.6% | -6.5% | -6.0% | -6.0% | |
| Belgium | 1,149 | -3.1% | -2.6% | -3.3% | -3.3% | |
| Poland | 615 | +2.1% | +2.0% | +0.5% | +2.2% | |
| Romania | 605 | +3.2% | +7.4% | +6.1% | +6.9% | |
| Latin America (pre-IAS 29) | 4,259 | +12.9% | +16.2% | -8.9% | +15.4% | |
| Brazil | 3,640 | +6.2% | +10.7% | -2.8% | +10.2% | |
| Argentina (pre-IAS 29) | 619 | +39.0% | +37.1% | -33.3% | +36.4% | |
| Asia | 1,340 | -4.1% | -4.9% | -6.9% | -6.2% | |
| China | 917 | -6.2% | -8.2% | -10.0% | -8.9% | |
| Taiwan | 423 | +1.1% | +3.2% | +0.9% | +0.2% | |
| Group total (pre-IAS 29) | 22,638 | +1.9% | +2.0% | -2.3% | +2.7% | |
| IAS 29(1) | +344 | n.a. | n.a. | +1.5% | n.a. | |
| Group total (pos- IAS 29) | 22,982 | +1.9% | +2.0% | -0.8% | n.a. |
Variations ex calendar and ex petrol are presented in relation to the restated 2017 sales, i.e. excluding sales of ex-Dia stores that exited the Group's scope.
Note: (1) hyperinflation and currencies
| Sales | Variation ex petrol ex calendar |
Total variation inc. petrol | ||||
|---|---|---|---|---|---|---|
| inc. VAT (€m) |
LFL | Organic | at current exchange rates |
at constant exchange rates |
||
| France | 39,903 | +0.3% | -0.7% | +1.1% | +1.1% | |
| Hypermarkets | 20,759 | -1.4% | -2.0% | -0.1% | -0.1% | |
| Supermarkets | 13,018 | +1.6% | -0.4% | +1.5% | +1.5% | |
| Convenience/other formats | 6,126 | +3.3% | +3.0% | +4.6% | +4.6% | |
| Other countries | 45,261 | +2.1% | +3.3% | -6.0% | +3.6% | |
| Other European countries | 23,467 | -1.6% | -1.1% | -0.4% | -0.2% | |
| Spain | 9,682 | -1.9% | -1.4% | +0.8% | +0.8% | |
| Italy | 5,265 | -4.0% | -4.7% | - 4.4% | - 4.4% | |
| Belgium | 4,274 | -1.7% | -1.8% | -2.3% | -2.3% | |
| Poland | 2,114 | +1.6% | +3.0% | +2.5% | +2.7% | |
| Romania | 2,132 | +4.3% | +7.6% | +6.1% | +7.9% | |
| Latin America (pre-IAS 29) | 15,713 | +8.9% | +12.0% | -12.8% | +11.5% | |
| Brazil | 13,097 | +3.9% | +8.0% | -9.8% | +7.6% | |
| Argentina (pre-IAS 29) | 2,616 | +29.8% | +28.8% | -25.2% | +28.6% | |
| Asia | 6,080 | -3.7% | -4.3% | -7.3% | -4.4% | |
| China | 4,144 | -5.9% | -7.7% | -10.3% | -7.8% | |
| Taiwan | 1,936 | +1.7% | +3.7% | -0.1% | +3.6 % | |
| Group total (pre-IAS 29) | 85,164 | +1.4% | +1.6% | -2.8% | +2.5% | |
| IAS 29(1) | -248 | n.a. | n.a. | -0.3% | n.a. | |
| Group total (pos- IAS 29) | 84,916 | +1.4% | +1.6% | -3.1% | n.a. |
Variations ex calendar and ex petrol are presented in relation to the restated 2017 sales, i.e. excluding sales of ex-Dia stores that exited the Group's scope.
Note: (1) hyperinflation and currencies
| Thousands of sq. m | Dec. 31 2017 |
Sept.30, 2018 |
Openings/ Store enlargements |
Acquisitions | Closures/ Store reductions |
Total Q4 2018 change |
Dec. 31, 2018 |
|---|---|---|---|---|---|---|---|
| France | 5,764 | 5,557 | 23 | - | -34 | -11 | 5,546 |
| Europe (ex France) | 5,599 | 5,571 | 78 | 9 | -60 | +27 | 5,598 |
| Latin America | 2,408 | 2,471 | 45 | - | -5 | +40 | 2,510 |
| Asia | 2,736 | 2,661 | 7 | - | -1 | +6 | 2,667 |
| Others1 | 1,111 | 1,143 | 80 | - | - | +80 | 1,223 |
| Group | 17,618 | 17,403 | 233 | 9 | -100 | +142 | 17,545 |
| N° of stores | Dec. 31, 2017 |
Sept 30, 2018 |
Openings | Acquisitions | Closures/ Disposals |
Transfers | Total Q4 2018 change |
Dec. 31, 2018 |
|---|---|---|---|---|---|---|---|---|
| Hypermarkets | 1,376 | 1,373 | 17 | 1 | -2 | -5 | +11 | 1,384 |
| France | 247 | 246 | 1 | - | - | - | +1 | 247 |
| Europe (ex France) | 460 | 454 | 3 | 1 | -1 | -5 | -2 | 452 |
| Latin America | 193 | 190 | - | - | -1 | - | -1 | 189 |
| Asia | 365 | 371 | 1 | - | - | - | +1 | 372 |
| Others1 | 111 | 112 | 12 | - | - | - | +12 | 124 |
| Supermarkets | 3,243 | 3,261 | 87 | - | -34 | 5 | +58 | 3,319 |
| France | 1,060 | 1,062 | 2 | - | -8 | - | -6 | 1,056 |
| Europe (ex France) | 1,756 | 1,743 | 54 | - | -26 | +5 | +33 | 1,776 |
| Latin America | 147 | 142 | 5 | - | - | - | +5 | 147 |
| Asia | 58 | 68 | 5 | - | - | - | +5 | 73 |
| Others1 | 222 | 246 | 21 | - | - | - | +21 | 267 |
| Convenience stores | 7,327 | 6,976 | 169 | - | -116 | - | +53 | 7,029 |
| France | 4,267 | 3,937 | 46 | - | -65 | - | -19 | 3,918 |
| Europe (ex France) | 2,446 | 2,433 | 120 | - | -42 | - | +78 | 2,511 |
| Latin America | 521 | 523 | 2 | - | -9 | - | -7 | 516 |
| Asia | 41 | 28 | 1 | - | - | - | +1 | 29 |
| Others1 | 52 | 55 | - | - | - | - | - | 55 |
| Cash & carry | 354 | 369 | 11 | - | -1 | - | +10 | 379 |
| France | 144 | 144 | - | - | - | - | - | 144 |
| Europe (ex France) | 42 | 45 | 5 | - | -1 | - | +4 | 49 |
| Latin America | 153 | 167 | 6 | - | - | - | +6 | 173 |
| Asia | 2 | - | - | - | - | - | - | - |
| Others1 | 13 | 13 | - | - | - | - | - | 13 |
| Group | 12,300 | 11,979 | 284 | 1 | -153 | - | +132 | 12,111 |
| France | 5,718 | 5,389 | 49 | - | -73 | - | -24 | 5,365 |
| Europe (ex France) | 4,704 | 4,675 | 182 | 1 | -70 | - | +113 | 4,788 |
| Latin America | 1,014 | 1,022 | 13 | - | -10 | - | +3 | 1,025 |
| Asia | 466 | 467 | 7 | - | - | - | +7 | 474 |
| Others1 | 398 | 426 | 33 | - | - | - | +33 | 459 |
1 Africa, Middle East and Dominican Republic.
Sales generated by stores opened for at least twelve months, excluding temporary store closures, at constant exchange rates, excluding petrol and calendar effects.
Like for like sales growth plus net openings over the past twelve months, including temporary store closures, at constant exchange rates.
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