Carrefour burdened by competitive pressure?

By Anita Awbi

- Last updated on GMT

Related tags Carrefour Retailing Supermarket Hypermarket

Global retail giant Carrefour has issued €750 million worth of
bonds to refinance debts, suggesting that the company is still
struggling under European market pressure.

This follows the announcement that 1,700 jobs will be axed at its main French offices, and comes thirteen months after the world's second largest retailer delivered its first profit warning.

Earlier this year, financial results indicated Carrefour's famous hypermarket format may be finding it hard to compete in the saturated Western European grocery market.

IGD senior business analyst Jonathan Gunz said: "The trading market in Europe is certainly difficult. But [Carrefour] is obviously taking steps to overcome that."

Like many of its competitors the supermarket group is currently engaged in price wars in many of its markets, not least its French base, where it is attempting to regain market share from rival chains.

"The importance of the French hypermarket format to Carrefour means it has to get that business right, and it's the single largest business indicator that analysts look to,"​ Gunz said.

"There were difficulties last year with these sales and Carrefour has implemented strategies to overcome that. It was lowering prices last year and working on private labels this year to improve price positioning and price image."

High unemployment, low GDP growth and conservative consumer spending at home have been attributed to the top French retailers precautionary action.

The firm's €750m bond sale, due in May 2013 to refinance a debt maturing in 2006, confirms its commitment to a €500m net debt reduction by the year-end.

And the job cuts represent an attempt to tackle a slump in domestic business performance and streamline its operations.

Gunz says the Carrefour strategy is a common response to growing caution in the European retail market - price pressures, low sales growth and consolidation are the top trends affecting the group's market in Europe.

"The short-term focus is that it's a tough environment,"​ he said.

"Carrefour isn't fully through its low price strategy, and what is clear is that the company is focusing on consolidating what it has already."

Carrefour is the top retailer in the French market, number one in Europe and is a leader in Asia. Food accounts for 60 per cent of the group's sales worldwide.

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