Carrefour warns on profit

LONDON: Carrefour, the world's No. 2 retailer, warned on profits for the fourth time in a year after a plan to raise prices backfired, and said a potentially lucrative merger in Brazil was off, at least for now.

Shares in the French group dropped to a two-year low yesterday after it said in a second-quarter sales update that it expected operating profit in the first six months to fall 23% and acknowledged it made a mistake in raising prices earlier this year, before some rivals.

“This is clearly another profit warning, the second in one month. Stay away from the stock,” said one Paris-based trader.

The latest disappointment will heap fresh pressure on chief executive Lars Olofsson whose ambitious transformation plan, launched in June 2009, is making little headway.

The shares have fallen 44% since September last year, but the Swede appears to retain the support of key investor Blue Capital an alliance of luxury tycoon Bernard Arnault and US group Colony Capital as only last month Carrefour said it would make him chairman in addition to his CEO role.

The firm pledged to focus on keeping prices down, while reigning in spending on promotions and loyalty schemes.

Finance chief Pierre Bouchut told analysts Carrefour had charged managers across the group to help with a recovery plan, which will be announced with interim results on Aug 31, and it was sticking with its goal to grow full-year profits.

But he admitted it faced a “handicap” in meeting that target, as competition in France had got even tougher since May and austerity measures were weighing on shoppers in southern European markets like Greece, Italy and Spain. - Reuters