Carrefour’s first-quarter results posted same-store growth in Spain, suggesting internal reforms and external factors are taking effect.

Carrefour’s first-quarter results posted same-store growth in Spain, suggesting internal reforms and external factors are taking effect.

Somewhat in the shadow of its domestic return to form, Carrefour’s first-quarter 2014 results showed the grocery giant’s second-largest European operation, Spain, has posted a second quarter of same-store growth.

That is something not seen since 2008. Only two years ago, it was buckling under a near 7% fall in like-for-like sales.

The upward trend began taking shape early in 2013. The appointment of Georges Plassat – who spent time at Carrefour Spain during the second half of the 1990s – as company chief executive in 2012 is likely to have injected greater urgency into rehabilitating the operation.

With Plassat at the helm, capex was refocused on Europe and directed towards store refurbishments. An everyday low-pricing strategy and loyalty programmes aimed at specific customer groups were introduced, along with a greater focus on fresh produce.

Carrefour experimented with non-food discounts at large hypermarkets and with a new price-focused grocery banner, Supeco. All these are understood to have contributed to the sales uplift.

But are the aforementioned initiatives alone enough to account for such improvement? After all, these reforms are not significantly different from those being implemented in still-underperforming markets such as Italy and Poland. We believe the main reason for the success is down to external factors.

Although it cannot be denied that Spain’s retail sector is still feeling the effects of a depressed economy, Carrefour’s ‘revival’ correlates with the stabilisation of the Spanish economy.

Furthermore, Carrefour has likely benefited from customers transferring from faltering regional co-operative Eroski or price-aggressive domestic leader Mercadona. The latter appears to have eased its pressure on price, providing some respite to other operators.

Last but not least, Carrefour’s push on franchised convenience stores is likely to have drained customers from independent stores already severely impacted by the recessionary environment.

Planet Retail is cautious on Carrefour’s performance in Spain. We acknowledge the efforts being made, but cannot help but think that Carrefour’s recent brighter showing has to be viewed in the context of poor past performance.

That leaves Carrefour still walking a tightrope in the market. Chief financial officer Pierre-Jean Sivignon stated simply: “Spain is a long-term game.”

  • Gildas Aitamer, retail analyst, Planet Retail