Carrefour full-year net profit drops 74 percent after $1.34 billion in turnaround costs

Carrefour 2009 net profit down 74 percent

PARIS — French retailer Carrefour SA said Friday that net profit last year fell 74 percent, impacted by more than euro1 billion ($1.34 billion) in restructuring charges linked to shuttering stores in Italy and turning around its stalling French operations.

The world’s second-largest retailer behind Wal-Mart Stores Inc. said that net profit in 2009 fell to euro327 million ($444 million) from euro1.27 billion in 2008.

Turnaround costs totaled euro1.07 billion including euro766 million in impairment charges, mainly in Italy, euro172 million in restructuring charges and euro66 million from Carrefour’s turnaround plan.

Revenue fell 1 percent to euro87.38 billion. Sales fell in France, Europe and Asia, but rose in Latin America.

In Paris midday trading, shares were down 2.1 percent at euro34.89.

Since new CEO Lars Olofsson took over last year, Carrefour has sought to gain market share in France, which accounts for 40 percent of sales, by slashing prices, promoting the brand, introducing a discount range and accelerating the conversion of stores to the Carrefour banner.

In Italy, it has withdrawn from the south, selling or closing six hypermarkets, to focus on the richer north of the country. It also sold its 20 percent stake in Italian retailer Finiper.

Olofsson said 2010 will remain challenging, but he hopes the changes will help Carrefour boost sales.

“Carrefour in the last couple of years has lost speed and I would even say confidence in its direction,” he said in a press conference.

“In 2009 we have made a reset. We have restarted the engine.”

But the environment will be tough. “I don’t see any significant improvement in the short term,” he said.

Priorities this year will be gaining market share, cutting costs, and reducing inventories. Carrefour also said it wants to expand in Brazil and China with an extra 22 hypermarkets and 140 hard discount stories in China and new stores in Brazil.

In Belgium, he said Carrefour will discuss the future of the loss-making operations with worker representatives next week, saying “we cannot continue this way.” He declined to comment further before staff consultations.

It plans to transform underperforming discount operations in Greece, changing them to Carrefour market stores to take advantage of a growth in demand for small, local shops in cities.

In its home market, Carrefour is continuing with the revamp of its hypermarkets, changing decor, expanding food selection and better tailoring the choice of goods on offer.

On pricing, a software tool has allowed Carrefour to better target its promotions, Olofsson said, promising fewer but bigger discounts this year.

Starting next week, Carrefour will start a campaign allowing customers to choose their promotions within a range of products.