Food producers not cooperating on price cuts, Carrefour CEO says
Reuters
Published Jul 26, 2023 16:52
Updated Jul 26, 2023 19:24
By Dominique Vidalon and Helen Reid
PARIS (Reuters) -The CEO of Carrefour (EPA:CARR), Europe's biggest food retailer, criticized suppliers as not cooperating in price renegotiations on Wednesday, even as the company said it sees inflationary prices easing and is looking to the second half of the year with confidence.
The French government last month ordered food producers including Danone SA (EPA:DANO) and Kellogg Co to cut prices. The move by France's finance minister to demand price cuts from the country's 75 biggest food producers was welcomed by grocers, which have been criticising consumer goods firms for what they see as unjustified price hikes.
"Suppliers are not really playing the game," Carrefour CEO Alexandre Bompard told analysts in a call on Wednesday following the release of first-half results.
Carrefour reported strong first-half sales and profit growth in its core French market.
Food inflation appeared to have peaked in the second quarter, Carrefour said, chiming with the message from consumer goods giant Unilever (LON:ULVR), whose finance chief on Tuesday said the peak of inflation is now behind.
Against that backdrop, retailers like Carrefour are increasingly venting frustration with food manufacturers that have put through large price increases.
A spokeswoman for retail industry group the Federation du Commerce et de la Grande Distribution (FCD) said, "The vast majority of industrials refuse to enter into a true renegotiation, as the government had requested."
Carrefour's first-half sales grew 11.2% on a like-for-like basis to 45.45 billion euros, driven notably by a solid performance in France, where Carrefour hypermarkets' low-cost groceries attracted shoppers struggling with a higher cost of living.
Group recurring operating income, however, declined 2.2% to 700 million euros ($774.6 million) at constant exchange rates, dragged down by costs tied to the integration of Grupo BIG in Brazil, Carrefour's second-largest market.
Still, CFO Matthieu Malige said the company sees a stronger second half in terms of recurring operating profit.
Sales of Carrefour-branded products grew, reaching more than 35% of half-year food sales, up three percentage points compared with the first half of 2022. Carrefour aims for its private-label range to account for 40% of food revenues in 2026.
"The push on private label this semester has been very strong," Bompard said.
Operating profit in France jumped 39% to 270 million euros on sales that rose 7.2% on a like-for-like basis. Carrefour has kept its market share in the country stable while other retailers lost share to discount grocers.
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Carrefour has vowed to step up expansion in e-commerce, open more discount stores and cut costs as part of Bompard's plan to speed the group's turnaround to 2026.
With net free cash flow rising by 196 million euros to 1.684 billion euros in the first half, Carrefour said it would stick with plans to buy back 800 million euros of shares this year, with 200 million euros completed to date.
Earlier this month Carrefour announced its first major deal in France in more than 20 years, agreeing to buy the Cora (LON:CORAC) and Match supermarket chains from Belgium's Louis Delhaize Group.
($1 = 0.9037 euros)
Written By: Reuters
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