France's Carrefour raised its savings target on Thursday as Europe's largest retailer delivered cost cuts of 1 billion euros ($1.1 billion) last year, helping it fund e-commerce investments and price cuts for customers. It posted a well-flagged 7.4 percent rise in 2019 operating profit, reflecting savings in its domestic market and a robust performance in Brazil, its second-largest market after France.
"The Carrefour 2022 plan is generating solid results and sets the group on a profitable growth trajectory," Chairman and CEO Alexandre Bompard said in a statement. Carrefour is in the midst of a five-year plan to cut costs and jobs as well as boost e-commerce investment to lift profits and sales, and as it seeks like many peers to tackle competition from major online rivals such as Amazon.
The French firm kept its annual dividend unchanged at 0.46 euros and set a new target to sell 300 million euros worth of non-strategic real estate assets by 2022. It had already hit a goal of disposing of 500 million euros of non-strategic assets by 2019, one year ahead of schedule. Carrefour said it was now targeting cost savings of 2.8 billion euros on an annual basis by end-2020 against a previous target of 2.6 billion euros, having achieved 2 billion euros to date. It also promised more savings beyond 2020.
Its 2019 recurring operating profit reached 2.088 billion euros, in line with the company's own guidance for 2.090 billion provided in January. Free cash flow, excluding exceptional items, rose 17 percent to 1.301 billion euros in 2019 while capital expenditures rose 160 million euros to 1.725 billion and should remain around that level in 2020.
FRENCH PROFITABILITY In France, where Bompard has made reviving flagging sales at hypermarket stores a priority, operating profit rose 15.6 percent, also in line with company guidance. Operating margin rose to 1.6 percent from 1.3 percent in 2018.
By 0915 GMT, Carrefour shares gained 0.81 percent, outperforming a 1.85 percent decline in the CAC-40 index of French blue chips. "Clearly the Carrefour management team are progressing at pace with the turnaround. Is it enough to get excited ?" asked Bernstein analysts in a note. "Although margins have expanded year on year, French margins are only at 1.6 percent and it is a long way to recover French profitability. Exceptional cost cutting tends to get harder as time goes on. Management is guiding towards more price investment in France," they added. Carrefour is reaping the benefit in its home market of purchasing alliances with Britain's Tesco and France's Systeme U.
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