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Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.PARIS -- French retailer Carrefour SA posted a first-half loss as it poured hundreds of millions of euros into price cuts and other promotions to resuscitate sales in its home market.
Carrefour, the world's second-largest retailer by sales after Wal-Mart Stores Inc., swung to a loss of 58 million euros ($83.4 million) from a 747 million euros profit a year earlier, on a 1.6% drop in sales to 41.28 billion euros. The company reiterated it expects this year's operating profit to fall as much as 18%, to between 2.7 billion euros and 2.8 billion euros.
"Consumers are more and more sensitive to promotional activity," said Chief Executive Lars Olofsson, who joined from food and drink maker Nestle SA at the beginning of the year. "The price image of the Carrefour brand is moving in the right direction in France."
Carrefour has for years suffered from stiff price competition in France, which accounts for 43% of its sales. The economic downturn has exacerbated Carrefour's image as a high-priced retailer as consumers turned to deep-discount stores and private-label products. To overhaul Carrefour's reputation, Mr. Olofsson pledged to cut costs this year by 500 million euros euros and put 600 million euros towards price-cutting, promotions and loyalty cards.
The Swedish executive said the group spent 353 million euros of its budget in the first half, and saw its market share rise by 0.3%. The expenditure, however, drove down first-half operating profit by 28% to 1 billion euros. In May, it unveiled a new Carrefour Discount line of private-label products designed to take business from deep-discount stores such as Lidl Dienstleistung GmbH and E. Leclerc.
To make the Carrefour brand more prominent, Mr. Olofsson is accelerating a program to rename its hundreds of Champion supermarkets as Carrefour Market. During the first half, sales in the renamed stores were 7% higher than under the old name. The group is also converting other stores to its deep-discount Dia brand.
Yet Mr. Olofsson is only beginning to address Carrefour's most serious dilemma, the supercenter. The big-box stores have struggled to sell general merchandise, and Mr. Olofsson said the format needed to be reinvented. He said the company will test new models next year before rolling out its solution in 2011.
Next month, Carrefour will unveil a new world-wide advertising campaign and price promotions. "Carrefour has not been a loved retailer for the last couple of years," said Mr. Olofsson.
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Mimosa Spencer contributed to this article.
Credit: By Christina Passariello
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