In the affluent Paris suburb of Montesson, Carrefour store manager Laurent Pasguay has plastered his mobile phone number and photo throughout the sprawling hypermarket.
“Customers say the store is too big, so it’s up to us to find ways to help them navigate and enjoy it,” said Pasguay. “They call or text when the lines are long at the cashier or when they can’t find the products being promoted this week. ”
The food retailer has adopted this tactic at all its hypermarkets in France, where consumer enthusiasm for big weekly shops has waned.
The success of chief executive Alexandre Bompard’s promised turnround may hang on such details. Since arriving in 2017, the 49-year-old has cut costs aggressively, slashed prices to win back customers, invested to catch up in ecommerce and exited unprofitable markets including China.
The results have been mixed. On the plus side, cash generation has improved significantly, allowing Carrefour to resume cash dividends and buybacks for the first time in years. Yet its business in France continues to suffer because of stiff competition and reliance on hypermarkets, while ecommerce penetration is low and operating profit has barely budged.
As a result, investors remain wary of the group that pioneered the hypermarket in France in the 1960s and exported it to become among the world’s biggest food retailers.
Its shares trade at a roughly 35 per cent discount to the European food retail sector and have slumped 20 per cent since Bompard took over. That lags behind increases over the same period of 64 per cent for Dutch leader Ahold Delhaize and 30 per cent for Tesco in the UK. US food retailers Walmart and The Kroger Co have left it in the dust, with rises of 84 per cent and 105 per cent.
The performance has frustrated Bompard and at times strained his relationship with Carrefour’s biggest investors, the Moulins family and Brazilian billionaire Abilio Diniz, who hold 10 per cent and 8 per cent stakes in the company respectively. Billionaire Bernard Arnault sold his stake last year.
Carrefour has also become a takeover target: Canada’s Couche-Tard showed interest last year before the French government scuppered its approach and smaller domestic rival Auchan wants to revive a bid after it was previously rejected in October, according to people familiar with the matter.
Bompard said the “hard and unglamorous” work of the turnround was now complete, setting Carrefour up for growth driven by ecommerce and opportunities in online advertising and data.
“All the bricks are now in place for a new, powerful model,” he said in an interview late last year. “I believe we are at a tipping point for our industry and, once we prove that, then the market’s perception of Carrefour will change.”
Bompard is expected to present a new strategy in the coming months. It will build on five-year targets announced in November to triple ecommerce revenue to €10bn and add €600m to group operating profit, which would be an uplift of 30 per cent from 2020 levels.
If successful, the digital push would validate the heavy investments Bompard has made. Like other food retailers, Carrefour has had to spend heavily on software, logistics, warehouses and skilled workers to enable ecommerce.
Supermarket chains in many countries have so far struggled to make sizeable profits from online grocery because of the resources required. In France, however, Carrefour benefits from consumers favouring click-and-collect over home delivery, which is more expensive to operate.
Bompard believes Carrefour has figured out how to thrive in the ecommerce era: “If we were having this conversation even two years ago, I would not have necessarily said that.”
But with ecommerce only 4 per cent of group sales in 2021, investors have focused on Carrefour’s physical retail operation, which includes 13,000 stores it operates directly in nine countries, with the biggest being France, Brazil and Spain.
France has dominated the debate because Carrefour still generates half of revenues domestically and comparable sales growth there has been muted outside of the 2020 pandemic boost. Price competition in the country has been more intense, analysts say, because France has more players than elsewhere in Europe or the US. Carrefour lost 5 percentage points of market share since 2010, mostly to the privately held groups Leclerc and Intermarché, and discounters such as Lidl, according to Kantar Worldpanel.
“The French business is more strategically challenged than people think,” said Bernstein analyst William Woods.
To cope, Bompard has closed and sold off stores, shed headquarters staff and invested the savings into lowering prices and in technology. By 2020, Carrefour achieved €3bn in cost cuts, and pledged another €2.4bn by 2024.
Stemming French hypermarket share losses has also been a priority. In Montesson, Pasguay has installed a sushi counter, a salmon smoking station and a stand staffed with Neapolitan pizza makers. In a nod to discount rivals, a section of the store offers low-price household basics and seasonal goods.
Pasguay holds morning management meetings to scrutinise the store’s daily net promoter score generated by customers’ ratings in the Carrefour app. The store is ranked against others in real time. “If the score drops, it’s a warning,” said Pasguay.
Some question whether better service and cheaper prices than urban centre rivals can reinvigorate sales, when it is the size of hypermarkets and the time needed to shop at them that many consumers dislike.
“Consumption habits have changed in the past 20 years as the population gets older and people buy more non-food items online,” said Frédéric Valette, an analyst at Kantar Worldpanel. Carrefour has stemmed hypermarket share losses, but “the competition is still very intense”.
For lossmaking French stores that Carrefour cannot fix, Bompard has farmed them out to motivated entrepreneurs, often former employees who want to be their own bosses.
Under a “lease management” model, Carrefour signs a long-term contract under which the entrepreneurs run their stores as they see fit, employ the staff directly and choose their own inventory and promotions. The stores must still carry some Carrefour products, and the group shoulders capital expenditures. Both share any losses for a transition period.
One big advantage: new managers can scrap certain terms of Carrefour’s union contract that give workers benefits, such as paid time off when a child is ill, employee discounts or annual bonuses.
Carrefour has long had many smaller-format supermarkets under lease management or franchise, but in 2018 only two hypermarkets had such arrangements. After a period of experimentation, Bompard added 10 in 2020, 10 in 2021 and plans 16 more this year.
Former Carrefour store manager Nicolas Catrix took over a struggling hypermarket in the town of Sens Voulx in 2019. He cut costs on cleaning and security, trimmed staff from 160 to 125 and started to buy more local produce. “Every morning I look at the accounts and ask myself what can I spend less on that will not affect customers’ experience?” he said. “The store was losing money and it does not any more.”
Tensions emerged with staff over changes to their contract terms, he admitted. “Workers lose out when stores go under lease management,” said Michel Enguelz, a representative at trade union organisation Force Ouvrière. “It’s a financial manoeuvre, nothing more.”
For Catrix, the experience has been successful enough that he has signed contracts for two more stores.
Barclays analyst Nicolas Champ said investors viewed lease management positively because it showed Bompard’s creativity in tackling old problems.
But he said Carrefour need to do more to improve its standing with investors: “They either have to consolidate the French market . . . or they need to improve performance there markedly by turning around hypermarkets and taking market share in ecommerce to improve margins.”
For Bompard the choice is not so stark. “I’ve never been as confident in the model that we are building,” he said. “However, I will continue to analyse any deals that come up. The progress we have made allows us to evaluate them very coldly and with very high standards since we do not need them.”
**This story has been amended to clarify the size of the stakes in Carrefour owned by the Moulins family and Brazilian billionaire Abilio Diniz.