Finance-Carrefour

Carrefour S.A.

Some Solution Thoughts

Introduction

Carrefour S.A. is the world’s second largest retailers. It built up a reputation based upon Hypermarkets as well as ‘Regular’ Supermarkets, some ’Hard Discount’ stores, their own brand name products, international growth and an extending product range (including financial services). In 1999 a major merger occurred with Promodes but the integration progressed quite slowly. In the early 2000s, the company underwent some boardroom ‘unrest’ and steady share deterioration. There was increased competition and Carrefour was slow to cut prices and hence lost sales growth. By 2004 Carrefour had decided upon an emphasis on growth within their successful markets (whilst eliminating the less successful ones). Cost saving (including reducing purchasing costs – as far as permitted) was also undertaken. The product range was extended, opening hours extended and staff recruitment increased. Of some interest is a) the comparison between Carrefour and Tesco and b) the switch in 2005 from French GAAP to IFRS reporting.

Questions for students

1. Analyze Carrefour’s competitive and corporate strategy. What are the key risks of the company’s strategy?

2. Analyze Carrefour’s accounting (including the effects of Carrefour’s switch to IFRS-based financial reporting). Are any adjustments to Carrefour’s financial statements necessary?

3. Analyze Carrefour’s operating management, financial management and investment management during the years 2001 to 2005, making use of both financial statement data and segment data. What are the primary drivers of the company’s poor share price performance?

4. Summarize the key findings of the financial analysis and provide recommendations for improvement to Carrefour’s management. What actions could management take to regain the confidence of Chrystelle Moreau and her fellow investors?

Question 1

Key strategies and the associated risks are the following:

- Competing...