In a display of resilience against a challenging economic backdrop, Carrefour (EPA:CARR) (CA.PA), the French multinational retailer, has reported a robust performance for the Full Year 2023. CEO Alexandre Bompard highlighted the company's sales growth, improved private label penetration, and e-commerce achievements in the annual earnings call. Despite inflationary pressures and high energy costs, Carrefour has not only managed to maintain a strong market position through strategic acquisitions in France and Spain but also plans to enhance shareholder returns through increased dividends and a new share buyback program. The company is poised to continue its growth trajectory with a clear strategy aimed at cost savings, pricing improvements, and advancing key performance indicators.
Key Takeaways
- Carrefour achieved sales growth and increased e-commerce success in 2023.
- Strategic acquisitions in France and Spain bolstered market position.
- The company announced an increase in shareholder returns, including dividends and share buyback program.
- Carrefour aims to maintain stable margins in France with a focus on price competitiveness and sales growth.
- Strong inventory management contributed significantly to operating free cash flow.
- Net free cash flow is projected to grow towards EUR 1.7 billion by 2026.
- Debt was reduced by EUR 818 million following the sale of operations in Taiwan.
- Inflation is anticipated to stabilize, with a focus on cost savings in sourcing, logistics, and energy efficiency.
- Profit growth is expected in France and Latin America, with a positive outlook for Brazil and Argentina.
Company Outlook
- Carrefour is confident in achieving its targets for 2024, focusing on cost-saving initiatives and pricing strategy improvements.
- The company targets net free cash flow growth, aiming for EUR 1.7 billion by 2026.
- CapEx for 2024 is planned at EUR 1.9 billion, with investments in integration and energy projects.
- Profit growth is anticipated in Other Europe, with a positive margin outlook despite challenges in Poland.
Bearish Highlights
- The macroeconomic environment poses significant challenges, including inflation and energy costs.
- Net financial results have declined due to a one-off profit in Argentina.
- The 2024 forecast is uncertain due to currency and market factors.
Bullish Highlights
- Carrefour has demonstrated strong sales growth and increased private label penetration.
- The company has seen market share gains in France and is adjusting prices to compete effectively.
- EBIT performance in Latin America is positive, with expectations for profit growth in Brazil and Argentina.
- Retail media contribution is on track to reach a EUR 200 million objective.
Misses
- No specific details for Poland's profitability in 2023 were provided.
- Net financial results decreased by EUR 80 million, impacted by a EUR 50 million gain in Argentina.
Q&A Highlights
- Discussions on market share gains in France and strategies to compete with rivals such as Leclerc.
- Ongoing negotiations with FMCG suppliers to improve volumes and profit growth in France and Brazil.
- Investments in energy reduction and integration projects are key focuses for the 2024 CapEx outlook.
- The French EBIT guidance excludes benefits from the integration of Cora and Match.
Carrefour's announcement of strategic acquisitions and initiatives, coupled with its adaptability in a volatile market, underscores its commitment to growth and shareholder value. The company's focus on cost savings, pricing strategies, and e-commerce positions it favorably for the future, even as it navigates an uncertain macroeconomic landscape.
InvestingPro Insights
In light of Carrefour's solid performance amidst economic headwinds, real-time data from InvestingPro provides additional context to the retailer's financial health and market valuation. Carrefour (CRRFY) boasts a perfect Piotroski Score of 9, indicating strong financial conditions and operational efficiency, which aligns with the company's robust sales growth and strategic initiatives mentioned in the article. Furthermore, Carrefour has a track record of raising its dividend for 3 consecutive years, reinforcing the company's commitment to enhancing shareholder returns as highlighted in the increased dividends and new share buyback program.
InvestingPro Data metrics offer a deeper dive into Carrefour's valuation and performance:
- Market Cap (Adjusted): 12.46B USD, reflecting the company's substantial size in the Consumer Staples Distribution & Retail industry.
- P/E Ratio (Adjusted) last twelve months as of Q2 2023: 8.68, which suggests the company is trading at a low earnings multiple compared to historical earnings.
- Revenue Growth last twelve months as of Q2 2023: 14.42%, demonstrating significant sales growth that the CEO emphasized in the annual earnings call.
InvestingPro Tips provide strategic insights for potential investors:
- Carrefour's valuation implies a strong free cash flow yield, which is particularly relevant given the company's focus on net free cash flow growth towards EUR 1.7 billion by 2026.
- The company is also trading at a low revenue valuation multiple, which could indicate that the stock is undervalued based on its sales figures.
For readers interested in a comprehensive analysis, InvestingPro offers additional tips on Carrefour's financial health and market performance. To access these insights and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are currently 9 additional InvestingPro Tips available for Carrefour, which can be found at https://www.investing.com/pro/CRRFY.
Full transcript - Carrefour SA PK (OTC:CRRFY) Q4 2023:
Operator: Good day and thank you for standing by. Welcome to the Carrefour Full Year 2023 Webcast and Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there'll be a question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alexandre Bompard, Chairman and CEO. Please go ahead, sir.
Alexandre Bompard: Good evening to all of you. Thank you for joining us for this presentation of our annual results. Before we begin, I would like to talk to you about our shareholders on France, Abilio Diniz, who passed away on Sunday night. Since 2015, his life has been deeply intertwined with that of Carrefour, and the story of the Carrefour Group will always be closely linked to him. For an earlier decade, he has served as an example for all of us, and I want to express in the name of the entire Carrefour Group, our profound emotion, admiration and gratitude for his contributions to Carrefour at Group level and in Brazil. Despite our sorrow, I have to present to you the results of our group for the year 2023. Before we get into any figures, I'd like to share some reflections on 2023. Last year was marked by an extremely challenging environment. We faced unprecedented macroeconomic challenges that impacted us more clearly in 2023, surging inflation across Europe, escalating interest rates and consequences of soaring energy costs. Consequently, we witnessed the most significant decline in volume for decades, at least since the late '80s. Meanwhile, customers increasingly shifted towards private labels and entry price items and showed a heightened dependence on promotions. These trends posed significant challenges to our industry. Retailers faced the pressure of high inflation and the complexities of adjusting pricing policy which added to the difficulty of negotiating with suppliers. Additionally, the financial services sector experienced tightening margins under intense pressure due to the rising cost of borrowings and the higher cost of risk. Moreover, the landscape of regulatory instability presented an erratic and restrictive backdrop, adding another layer of complexity to our strategic planning and execution. These challenging conditions have led to a clear polarization among retailers. Some have not been able to maintain their footing, while others have seized the opportunity to strengthen their market position. Against these challenges, Carrefour maintained a strong performance and demonstrates the strength and resilience of its economic model. This resilience is reflected in all our key performance metrics. Our sales continued to grow, thanks to our commercial strategy. In particular, we reached 36% of sales by our private label products, three points more than in 2022. And our e-commerce has posted remarkable performance with a 26% increase in gross merchandise value with plus 40% in Brazil and plus 16% in France. Regarding the recurring operating income, the group's performance was mixed. In Europe, there was a notable increase in France, plus 19% and Spain. This is an impressive accomplishment given the significant rise in energy costs and challenges in financial services. On the other hand, in Brazil, recurring operating income decreased due to the challenges of integrating BIG within the volatile market environment alongside one-off events and store conversions. Matthieu will detail this shortly. Last but not least, we delivered a record high net free cash flow at EUR 1.6 billion. This was made possible, thanks to our continuous efforts year after year to improve our cash conversion ratio. This financial performance demonstrates our ability to maintain strict control of our operations. We've met several important goals as part of our Carrefour 2026 plan, proving that our strategic moves are paying off. The penetration of private label, the growth of e-commerce with substantial improvements in profitability, a clear indication of the robustness of our model after years of strategic investments. The expansion of our successful format, further strengthening our market footprint and the development of our franchise model, especially in convenience stores, along with our leased management approach for our performance. By 2024, we aim to have half of our revenue coming from franchised stores in France. On top of this, after the important acquisition of BIG in 2022, we carried out significant moves in M&A. In France, we announced the acquisition of Cora/Match, which is our first major acquisition in our own market in more than 20 years. We carried out this operation under excellent conditions and acquired valuable assets at favorable prices, which should result in a value-creating transaction. This strategic operation involving a robust range of assets will strengthen our position in domestic market and boost our growth in the years to come. The stores geography we are integrating is highly complementary to ours, promising synergies that will enhance our market presence. And in Spain, we reached an agreement to acquire 47 stores from El Corte Inglés to strengthen our position in several key regions of the country. These acquisitions demonstrate our ability to pursue our external growth strategy for targeted and strategic acquisitions. This leads to market share gains and synergies at a reasonable cost. Thanks to the strength of our balance sheet itself as saw the results of our transformation. Lastly, our performance extends to our social and environmental actions and reflects our commitment to making a positive impact. We have surpassed our non-financial objectives, as measured by our Corporate Social Responsibility Index achieved a score of 110%.-- in particular, we met our Scope 1 and 2 emissions reduction goals two years ahead of the planned time line with a reduction of already minus 38 by the end of 2023. Furthermore, we've achieved substantial advancements in aligning our top 100 suppliers with a 1.5-degree climate trajectory and gauging 44% of them in this crucial report. We have also made significant strides in women's health initiatives, demonstrating our commitment to the wellbeing and empowerment of our workforce. And finally, our Carrefour Invest program has been a success, enabling over 30,000 employees to become shareholders fostering a sense of ownership and alignment with our company's vision. In summary, 2023 has been a year of significant accomplishments, highlighting the strength of our model. All this was made possible, thanks to the commitment of our team and our franchising partners. I'd like to pay tribute to their work, especially in such an uncertain context. Now let's consider what 2024 might hold for us. We are moving into the New Year with confidence for several important reasons. First, the macro landscape is expected to gradually normalize. The high food inflation in Europe seems to be behind us. In addition, there are indications suggesting a stabilization of purchasing power with a possible positive impact on consumer credit, especially in countries like Brazil and Spain. Second, in 2024, we'll see the outcome of projects that we implemented in 2023. In Brazil, we anticipate enhanced performance driven by the complete transformation of BIG stores, a strong focus on the quality of operations on cost management. Furthermore, our Eureka purchasing platform is set for significant ramp-up for missing major economic gains for all our European countries. The rollout of Maxi across all our stores will enhance in-store productivity and the efficiency of our supply chain. And we plan to intensify our cost-saving initiatives especially in our European operations on the quarters as we move towards a more integrated European framework. The initiatives of Carrefour 2026 will also continue to contribute to our growth. In particular, the expansion for our private label portfolio and its program of innovation make us very confident about reaching our goal of 40% of sales by 2026. We'll also continue to benefit from our digital transformation, helping to streamline our operations and enhance the customer experience. And we will place a greater and fastest and price competitiveness in France as our customers are more sensitive to a permanent price. Following the market leader's aggressive pricing strategy, we have initiated price adjustments since the fall, which have already resulted in an improvement in our Net Promoter Score. In 2024, we will continue to improve our pricing strategy without compromising our financial performance, including the growth of our financial metrics in France. To wrap up, we are confident in achieving our 2026 targets. This confidence comes from a strong track record, proving our ability to perform and deliver constant improvements over the last six years under challenging conditions, including net free cash flow and earnings per share which have shown steady growth. It's based on this confidence on our very strong balance sheet that we decided to increase the total shareholder return, including dividend and buybacks to EUR 1.3 billion in 2023. We also decided to raise our dividend to EUR 0.80 per share, and we confirm our objectives to grow this dividend per share by a minimum of 5% per year going forward. With this increase, the dividend level is the highest since close to EUR 15. In parallel, we are announcing a new share buyback program worth EUR 700 million in 2024. To conclude, 2024 is shaping up to be a spot year, fueled not just by our drive to lead the pack, but also by our partnerships with the Paris 2024 Olympics and Paralympics. It's a fantastic chance to bring together our teams and customers turning every campaign into a team sport. Following the Olympic motto of higher, faster, stronger, we are ready to boost our collective efforts and achieve new hights together. Thank you for your attention. I will now hand over to Matthieu.
Matthieu Malige: Thank you, Alexandre, and good afternoon to everyone. It's a pleasure to be with you to cover our 2023 financial results in detail. Let's start on Slide eight with a look at our full year and Q4 revenue. Sales for the full year reached EUR 94.1 billion, up 10.4% like-for-like. France posted a plus 4.7% like-for-like sales growth, including plus 6% in food sales with solid growth in all formats. E-commerce continued to grow strongly with GMV up 16% in France. Europe was up 5.5% like-for-like last year with different situations from country to country. Spain delivered solid 5.8% like-for-like growth over the quarter. Belgium and Romania delivered high single-digit like-for-like sales growth. After a tough year in 2022, Belgium continues to recover at a rapid pace with solid customer gains and volume growth driven by a strong increase in NPS and aggressive marketing campaigns. Italy maintained a positive sales dynamic with 3.1% like-for-like growth in the full year. Conversely, like-for-like sales in Poland decreased slightly in 2023 on the back of very high comps in 2022 related to the war in Ukraine. Like-for-like sales in Brazil were down minus 1.3% over the year in an adverse environment shaped around sequential deflation. Atacadao outperformed the retail segment. Thanks to its defensive nature and attractive price positioning. We saw signs of improvement towards the end of the year across all formats. Argentina continued its strong momentum. It delivered further market share gains and positive volumes in hyperinflationary environment. Q4 underlying activity remained fairly in line with previous quarters. The key moving parts being the slowdown in food inflation in Europe, which started in Q2. Business trends and shopping behavior, including trading down, remained globally unchanged in the region, although with some sequential improvement in volumes. In Brazil, sales were impacted by food deflation in the quarter. Volume trends improved throughout the quarter, although at a slower pace than expected. Conversely, inflation reached new highs in Argentina in the context of the devaluation of the peso. Like-for-like sales in Q4 benefited from a strong activity as consumers stocked up in anticipation for further inflation. In total, group sales grew by 10.2% like-for-like over the fourth quarter. Online sales remained buoyant with e-commerce GMV growing by 31% in Q4 driven by Brazil and France. As you can see on Slide 9, the deceleration in food inflation we highlighted in Q3 was confirmed in Q4, reaching an average of 6.5% in Europe in December. Food prices increased sharply in Q1. They began to ease in Q2 followed by fairly stable prices in the second half of the year. In the end, the slowdown in like-for-like sales growth in Q4 versus Q3 in Europe mainly reflected the deceleration in year-on-year inflation. Recurring operating income for the year reached EUR 2,264 billion, 4.7% below 2022. The gross margin rate was slightly down versus last year, mainly reflecting the move towards more stores under franchise including the transfers to leased management in France. Distribution costs as a percentage of sales increased in 2023 in the context of strong inflation notably on energy costs, which were EUR 170 million higher than the previous year. The trend on distribution costs improved significantly in the second half with better absorption of inflation. Thanks to strong cost savings initiative again in 2023. Gross cost savings amounted to EUR 1.06 billion in the year. In conclusion, after a 33 bps erosion in H1, recurring operating margin was stable in H2, notably driven by the improved momentum in Brazil as we will see shortly. Moving on to the operating profit by region, starting with France on Slide 11. Recurring operating income increased by 19% to EUR 988 million. In the context of high inflation, we maintained a good commercial performance and strong cost discipline, which allowed us to increase operating margin by 37 basis points to 2.6% compared to 2.2% in 2022. Operating margin in France improved for the fifth consecutive year. We notably maintained strong control of operations and costs despite inflation of energy costs. We benefited from the initiatives of the Carrefour 2026 plan, including improved profitability of digital activities, notably e-commerce. All these initiatives will keep supporting our performance going forward. The increase in operating margin was at the upper end of our expectations last year. This gives us full capacity to carry on with confidence. 2024 will be a big year in France with the integration of Cora/Match as well as 31 former Casino stores. At the same time, we intend to improve price competitiveness and we are confident that we can achieve this while maintaining growing operating profit, albeit at a slower pace in 2024 than in 2023. Our cost savings plan will keep delivering notably with the rollout of the Maxi productivity method and the ongoing reorganization of our heads. Profitability of our European countries was mixed last year. As shown on Slide 12, recurring operating income for the region was stable in 2023 at EUR 604 million. Spain delivered strong growth in recurring operating income, up 14% despite pressure on financial services. The drivers for the strong Spanish performance were pretty much the same as for France, notably strong cost discipline. Italy, Belgium and Romania were globally stable with sound management of operations, offset notably by a sharp price in wages and in energy costs, which we expect to reverse in 2024. Last, Poland weighted on the region's profitability on the back of a very high comparable base. Let's move on to Brazil on Slide 13, where the key highlights in 2023 was the integration of Grupo BIG. This, together with sharply declining food inflation and still positive cost inflation weighted on the group's profitability, but there are actually several elements to consider to put the 2023 performance into perspective. First, the integration of Grupo BIG is progressing well. Store conversions were completed at the end of H1, along with the one-off costs related to those conversions. The remaining one-offs in H2 were related to the cost of recruiting a high number of former BIG customers in financial services. This is an investment for the future. Second, the converted stores are ramping up rapidly. Stores converted to Atacadao were particularly buoyant with 17% like-for-like sales growth and an EBITDA margin of 5% in the last quarter. Finally, the legacy business showed good resilience, especially at Atacadao, while the retail segment was more impacted. Financial Services activity faced an adverse environment like in Europe with high interest rates putting pressure on financial margin and an increase in the cost of risk. Overall, the recovery of Brazil was a bit softer than expected in terms of year-end sales, but the path seems clear. Altogether, recurring operating income in Brazil was down 17% in H2 after a 39% decrease in H1. Finally, on the Grupo BIG synergies, we have secured BRL 1.6 billion of cost synergies, a much higher number than the original plan. We reiterate our confidence in delivering BRL two billion of total synergies by 2025, thanks to the commercial ramp-up of the converted stores. In 2024, our profitability in Brazil will benefit from the current restructuring of the retail portfolio as announced by Carrefour Brasil last November. First, 40 Carrefour hypermarkets will be converted to Atacadao Sam's Club of which 20 this year. Second, part of the Grupo BIG acquisition was a noncore network of supermarkets under the Tododia, Bompresso and National brands. A large portion of these stores were structurally loss-making for a total EBITDA loss of around EUR 40 million last year, and we decided to either sell or close them. This process is being implemented rapidly with 104 out of the 123 identified stores already disposed of as of today. The remaining will be completed by the end of Q2. Carrefour enjoyed another solid year in Argentina, as you can see on Slide 14, with a strong increase in recurring operating margin at 4.5%, up 138 basis points versus previous year. This reflects successful commercial and operational momentum with growing volumes and steady market share gains. Recurring operating income amounted to EUR 96 million compared to EUR 92 million in 2022, a fairly limited increase as a consequence of the IAS 29 accounting rule on hyperinflation, which converts the full euro P&L at the year-end exchange rate. The reported recurring operating income includes a full year impact of minus EUR 92 million from IAS 29. The devaluation of the peso in December had a minus EUR 60 million impact on operating income on its own. In conclusion, the evolution of the group's recurring operating income was shaped around a strong improvement of profit and margin in France and in Spain, offset by Brazil and, to a lesser extent, by Poland, while the rest of the business was roughly stable. As you can see on Slide 15, another way to look at 2023 recurring operating income evolution is to isolate the weight of financial services, Grupo BIG one-offs and the impact of the peso devaluation in December. You see that retail operations held up quite well with an increase of EUR 130 million in recurring operating income. Moving on to the bottom part of our P&L on Slide 16. Nonrecurring operating expenses increased significantly to EUR 558 million in 2023, driven by provisions related to reorganization projects, notably in France as well as asset impairments in Brazil on stores that are currently being closed, as I mentioned earlier. Net financial charges decreased to EUR 410 million compared to EUR 490 million in 2022. This was driven by lower net debt following the disposal of Carrefour Taiwan last July and higher interest income on short-term financial investments in a context of higher rates. The tax charge amounted to EUR 439 million compared to EUR 408 million in 2022. The effective tax rate was higher than last year due to the depreciation of deferred tax assets on Grupo BIG in 2023 versus a one-off tax credit in Brazil in 2020. Net income from discontinued operations was EUR 729 million, mainly corresponding to the capital gain of the sale of Carrefour Taiwan. So bottom line, adjusted net income group share improved by 8% or EUR 92 million to EUR 1.304 billion. Finally, thanks to the reduction in the number of outstanding shares following our share buyback program, adjusted EPS increased plus 12% to EUR 1.83 compared to EUR 1.63 in 2022. As you can see on Slide 17, the 12% growth in EPS last year is the fourth consecutive year of double-digit growth delivered by Carrefour. In total, EPS grew about 80% since 2017, a compound annual growth rate of plus 10%. Moving on to net free cash flow on Slide 18. We generated a record level of net free cash flow in 2023 at EUR 1.622 billion, a EUR 360 million increase versus 2022. It includes a negative comp effect of about EUR 100 million linked to the sale of Carrefour Taiwan, which was consolidated for six months in 2023 compared to full year 2022. Our operations delivered a solid EUR 363 million increase in net free cash flow, thanks to optimized management and strict control of inventory. As a matter of fact, the inventory level decreased by three days in total and 18 days in nonfood inventories last year. This number does not include the additional contribution of EUR 94 million from asset disposals. Asset disposals included mainly real estate assets for EUR 395 million notably relating to the large sell and leaseback transaction in Brazil closed in H1. In 2023, Carrefour was a net seller of real estate for EUR 62 million, with investments in real estate amounting to EUR 333 million. This is detailed on Slide 35 of the presentation in the appendix. I'll be quick on the net free cash flow details on Slide 19, just to highlight that cash tax came down by EUR 106 million, thanks to the good use of tax credits in Brazil. You can also see that as just mentioned, change in working capital was a key driver for operating free cash flow, thanks to strong inventory management. CapEx was stable as guided at EUR 1.85 billion. As we did for EPS, I would like to take a moment to underline the trajectory of net free cash flow on Slide 20. Our strategic actions, combined with a well-established cash culture have allowed us to turn our model into a very efficient and steady cash-generating one. As much as we are confident that EBITDA and recurring operating income will increase in 2024, we believe that net free cash flow should be closer to the initial growth trajectory towards the objective of above EUR 1.7 billion in 2026. I'll be brief on debt on Slide 21. As you already know, most of the key moving parts. The EUR 818 million reduction in net debt was primarily related to the sale of Taiwan as most of our EUR 1.6 billion net free cash flow is paid out to shareholders through dividends and share buybacks. Finally, the capital allocation policy that Alexandre presented earlier is on Slide 22 for your reference. With this, I thank you for your attention. Alexandre and I are now ready to take your questions.
Operator: [Operator Instructions] And your first question comes from the line of Sreedhar Mahamkali from UBS. Please go ahead.
Sreedhar Mahamkali: Hi, good evening Alexandre and Mathieu. Thank you for taking my Question. Maybe three questions, please. Firstly, just going back to what you said, Matthieu, on France and trying to reignite competitiveness in your pricing. Can you talk a little bit more about it? It seems like you're talking to a year of stable margins in 2024 in France. Is that the right interpretation of the combined efforts of investing in price and some sales growth? Secondly, in terms of working capital, I don't think we've seen anything like this in the past few years, the level of contribution from working capital of that magnitude. Certainly, there wasn't a hint of anything like this coming in the first half either. Is there anything one-off here that might reverse in 2024? Or should we continue to expect positive contribution to cash flow from working capital? And the third one really is a balance between dividend and buyback. Can you just talk us through what prompted a big dividend increase and it kind of slightly turned down buyback? Just curious to hear your thoughts there.
Alexandre Bompard: Thank you, Sreedhar. I will take the first one. As you know, of course, I think we have been both very efficient and very rational during the wave of inflation in '22 -- '21, '22. And it has enabled us both to gain market share in a very steady way. As you remember, we were -- we gained more market share than anyone in volume terms. And in the meantime, we have been capable to improve and to continue to improve our financial metrics for France. In 2023, there has been a new dynamic. The origin of this new dynamic is the strong initiatives of Leclerc on permanent prices. And you know how it's a key differentiating factor in the customer perception in a period of crisis. This strong initiative of Leclerc as leaders to start adjust prices in Q4, and the effect was a notable enhancement to our Net Promoter Score in the Q4. The idea in 2024 is to continue to invest and to continue to improve this price competitiveness as we have done in the last and to strike a clear balance with our financial performance. So the objective is really to continue to combine this price competitiveness and the maintain of a good dynamic in our financial metrics. And we do think that we are capable to do that. We've done that in the past. And it's really the dynamic we want to continue to maintain our commercial policy.
Matthieu Malige: And maybe to precise that a little further, I spoke in my speech of further growth of our profit in France in 2024. This is what we are expecting. On your second question, Sreedhar, relating to working capital. Well, I don't think there's one-offs. I think it's just the result of a very strong management by the teams of the inventory levels in a market where volumes were down and notably on non-food products. I think the teams have done a fantastic job at reducing our level of inventories. I said 18 days, which is significant -- so this is good. We intend to take that further, maybe not with the same level of magnitude, which was very strong this year, but we intend to keep going in that direction.
Alexandre Bompard: Concerning your third question, Sreedhar, the decision the Board has taken this morning is to make a significant step-up in the ordinary dividend is a clear message of confidence from the management team, from the Board in the real sustainability of cash generation at Carrefour. It's based on the very solid track record as we saw in the presentation. We really believe this provides additional visibility in terms of return to shareholders and really strengthens Carrefour shareholder-friendly capital allocation policy. All the more that we also confirmed, as I said, the target of growing ordinary dividend by at least 5% per year on this higher level.
Operator: And your next question comes from the line of Cedric Lecasble from Stifel. Please go ahead.
Cedric Lecasble: Good evening, Aixon, Mathieu and team. Thank you for taking my question. I actually have a global question regarding the profitability of operations in Europe. You were a little specific about France. I just wanted to come back on the moving parts on the volume situation, where do you see inflation in '24, food inflation? What do you expect for volumes? How will cost cutting compare with last year? And you believe you can globally -- you're a little specific about France. Do you think Europe as a whole can grow profitability in '24? That's my -- it's a short question, but maybe you have a long answer.
Alexandre Bompard: Okay. So regarding inflation, as you know, we just concluded our negotiation with FMCG suppliers, one month earlier than usual. Based on this, we think we are heading for 2024 towards food inflation in the market progressively stabilizing at a low positive levels, low single digit. It's what we see in the market for 2024, with, of course, higher inflation in H1 and lower in H2. To continue once again on inflation, we do not see this inflation as temporal structurally higher in the coming years than we experienced in the past decade. Concerning volumes and trading down, of course, cumulative inflation over the past two years continues to put pressure on purchasing power despite reduced inflation and more stable price in the market. So at the end of the year, we continue to see trading down on pressure on volumes in the market. We expect that to continue in the first part of the year. That said, with the combination of easing general and food inflation and continued wage inflation, households are starting to recover some purchasing power, volume decline should progressively ease over the year. That's what we see about the market, on the inflation and the consequence on the volume. Of course, we continue to be very proactive commercially with notably emphasis on our private label, including the simple range with promotions with loyalty initiative repricing investments, I mentioned, with rollout of the Maxi And we fuel all that by our EUR one billion cost savings program in 2023. So that's really what we see. And of course, in 2024, we will see some improvement in customer purchasing power. And progressively, it would have an impact on the volume and the diminishing also of the trading down.
Cedric Lecasble: And on cost savings, you still have a potential -- where will the cost savings mostly apply in '24? And are there some changes versus '23?
Matthieu Malige: So -- yes, Cedric, we are satisfied with the dynamics on cost savings. If you remember, we had a EUR four billion cost savings plan over four years for 2023, 2026 strategic plan. So we delivered a little above EUR one billion in 2023. So we're very satisfied with that. The savings came from first sourcing, where with improved negotiations and the beginning of like -- buying office in Spain, we have improved our purchasing conditions. We've also improved our purchasing conditions on private label with a massification approach of private label, which are now negotiated more and more at a European scale. We've improved our logistics with a quite deep logistics plan to transform our logistics and reduce its cost and improve its efficiencies. It also includes operating costs with energy. Let me start with energy, maybe where given the high level of inflation on energy costs. We've implemented a number of operations to reduce our energy consumption. It does translate into our ESG objective, but it also does translate into some cost savings. In the stores with the Maxi projects, we have a better efficiency and in our head offices, we've announced a number of reorganization projects in 2023. You saw that in the nonrecurring expenses of the year where we are progressively moving from a country-by-country head office organization towards more and more mutualized functions across Europe with the objective to reduce the overall cost of our head offices. So many, many initiatives, which were launched in 2023, and which are continuing into 2024 with many new ideas popping up on the radar from our teams on the ground who have a lot of creativity to improve our operating model.
Operator: And your next question comes from the line of Izabel Dobreva from Morgan Stanley.
Izabel Dobreva: Hello, good evening. I had three questions. Firstly, I wanted to go back to the topic of France, If we look at some of the external data sources, they suggest that the mark are weakened and was down 60 basis points in January. So my question is, first, do you agree with this third-party data? Because I know sometimes it shows things may be different than what you see internally? And if the market share is indeed down to this level, when would you expect it to stabilize? I think in some of the previous answers, you talked about striking a balance between the margin and commercial KPIs and the price investments, but how does your market share expectation kind of feature within that? I also saw some mentions in the press that by the summer, you expect the market share back to 22.5%, which I suppose implies a stable market share by the summer. Is that how you're thinking about it? I think that would be very helpful to just understand your thoughts around market share evolution versus margin evolution in France. Then my second question is on the Eureka ramp-up. Could you give us a sense of how you're progressing with the supply negotiations? How much volume you expect to be doing through this platform over 2024, so we can have a view on the extent of the synergies? And then finally, I had a question on LatAm. So you outlined a number of the positive levers that you have. The conversion of the closures, et cetera. So would you expect that next year LatAm EBIT can be above EUR one billion?
Alexandre Bompard: Thank you for the question on the market share. If you may authorize, I would like to put things in perspective on that. Over the past five years, first on France, we doubled our recurring operating income and recurring operating income margin. And by summer this year with, on your right, the integration of Cora/Match as well as former Casino stores. We will represent about 22.5% of the French market, which is the highest level for more than 15 years and broadly at par with our largest competitor. Thanks to both our acquisition and our organic performance, organically now because I think it's the sense of your question. We delivered, as you know, very, very solid performance in '21 and '22. . Two years of consecutive market share gains in challenging environments, including COVID on the first year of strong inflation. And we gained more market share than anyone, including in volume terms. And this year in volume terms, we are globally stable. In 2023, there has been a new element, which is linked, as I told before, to the huge offensive of Leclerc on the permanent prices, which emerged as a key differentiating factor in the customer's perception. We have to react and that's what we did by starting adjusting prices in Q4, resulting in an enhancement to our Net Promoter Score. That's exactly what we will do in 2024 while managing these adjustments carefully to strike a balance between a better market share dynamic and our financial performance. And it's exactly the sense of what we have been doing in the Q4. And this is exactly what we will do in the next weeks, and we will continue to develop that to restore a better dynamic in terms of market share. Matthieu?
Matthieu Malige: Yes. Your second question, Izabel, related to Leclerc or buying platform. So let me just remind you that this platform has the objective to negotiate with very large FMCG international suppliers, which do serve all our six European countries with similar products. So it's the very big names that everyone has in mind. So we had the first batch of four suppliers who are negotiated at Leclerc last year. We were satisfied with the outcome of these discussions. And so we are now moving to a second wave of 15-plus suppliers. It's just the early days of the negotiation. So this is still ongoing. But we're confident that we'll get to agreement and that which will be a positive for Carrefour. Your last question was relating to LatAm EBIT above EUR one billion in 2024. So we're not guiding -- by region. So I won't comment there. I think the sense of the comments is that we feel strongly that Argentina with very good dynamics in a complex macro environment, but a very strong performance. And as regards Brazil, we've highlighted the elements behind the reduction in profit in 2023. And we think that there are a number of factors at play which would help the profit of Brazil to increase in 2024.
Operator: And your next question comes from the line of Andrew Gwynn from BNP Paribas (OTC:BNPQY). Please go ahead.
Andrew Gwynn: Hi, good evening team. Your first question actually comes back to why aren't you guiding for 2024? It sounds like there are some positive, obviously, France hoping to grow...
Matthieu Malige: Sorry, Andrew, the line is very bad. Can you maybe speak more slowly so we can hear you better.
Andrew Gwynn: Try again. So the first question -- yes, apologies. So the first question is just on the lack of guidance. I mean, obviously, you've given some moving parts of France, hoping to see some improvement, Brazil as well. So why aren't you giving group guidance as you did last year? Second one is on the -- I suppose actually, very simply, why have you delayed the price reaction to Leclerc? I think initially, maybe the hope was it would go away, but it seems to be quite a late reaction to initiatives that sort of going on around about April, May time? And then the final one, just on the inventory improvements pretty substantial. But when I look into the accounts, it's quite a big movement in payables. I appreciate there's quite a lot going on with food inflation, but just help me reconcile that.
Alexandre Bompard: Yes. Well, on the guidance, in my speech, I said that we were confident that EBITDA and recurring operating income would increase this year. I think that's the same statement as we had last year and which is, in fact, the trajectory that we highlighted for our 2026 plan, which is to grow EBIT and EBITDA year after year. So we confirm that for 2023 -- '24, sorry. I nuanced the outlook for the cash flow given the high level that we reached in 2023 where I said that in 2024, it should be closer to the initial growth trajectory that we said at the end of 2022 towards our objective of being above EUR 1.7 billion in 2026.
Matthieu Malige: On your second question, I don't share at all your points. As you probably remember, the dynamic in terms of market share gains were very good in both in value and in volume until the end of last year. Leclerc intensified is offensive on the Q2, and we analyze that. We had, as you know, our mix permanent prices, promotion, loyalty and we try to define new mix and an intensification of the investment on the permanent prices. Alexandre Bompard put that in place when he joined in September. We have many initiatives launched in the same time and we are in the good momentum.
Alexandre Bompard: On your last question relating to payables, maybe we'll take that one offline. But when I look at Page 19 of the press release where we have the balance sheet, we see that the trade payables are reducing by EUR 150 million at year-end '23 versus year-end '22. So as I said in my comments, the main driver behind the cash flow from working capital is the reduction in inventories.
Andrew Gwynn: Yes. Maybe I will follow up on that at -- note 6.4.1 with the notes to the cash flow statement.
Operator: And your next question comes from the line of Nick Coulter from Citi. Please go ahead.
Nick Coulter: Hi, good evening. Thanks for taking my questions. Apologies, first, I have a couple of follow-ups to clarify. Firstly, are you targeting profit growth in France for 2024 and margin growth or just profit growth, please? I know you've talked to a 3% margin ambition previously. And then in answer to Andrew's question, did you say that you expect group EBITDA and EBIT to grow in 2024, but you haven't written that in the release. Those are the first two, please.
Matthieu Malige: Sorry, can you repeat the second one, Nick, I didn't get it?
Nick Coulter: It was -- did you say to Andrew's question that you will grow EBITDA and EBIT this year on a group basis, but you haven't written that in the release as you did last year?
Matthieu Malige: So that's what I said that our objective is to grow EBIT and EBITDA in 2024 versus 2023 numbers. So on your first one, the message is that we think that for France and the profit growth, the message that we were passing is that as we did in Q4, we're going to keep investing into our competitiveness. And we think this is compatible with further enhancing our profit in France. And we think it would not be at the expense of future profit growth. I think that's the message tonight. Then the detail of that, we'll see how it develops, but that's the message.
Nick Coulter: Okay. So profit, but maybe not margins, I guess, depending on how it pans out from what you're saying. And then on the balancing of the dividend and the buyback. Given your shares are on quite a low rating, it isn't clear to me why you wouldn't continue to favor a buyback at this point? Apologies I think, get the rationale from the previous answer. And then a quick third one, if I may, please. But I asked how much did your French network sales in 2023. Work from franchise or lease managed stores and if there's a 2022 figures are comparable as well, please?
Matthieu Malige: So on the -- on the dividend, I think the message is that we increased dividends to rebalance between buyback and dividend in a message of confidence in our structurally cash-generating model. So we raised the bar on dividend as a sign of confidence. And then our share buyback programs is significant when you compare it to other players. And so it is -- indeed, it will allow us to take advantage of the undervaluation level of the stock it is maintained.
Nick Coulter: Okay. So I hear just maybe a little bit critical as to why you did that now when your shares are where they are, why you wouldn't rebalance in the future. But I guess that's a matter of judgment.
Matthieu Malige: Well, yes, and it's four years of significant cash flow and growing. And so as I said in my speech, we think that the cash culture is very deeply embedded into the organization now with people working on improving cash generation on all actions. And so that is the ground for improved confidence of the management and the Board, hence the decision of increasing the dividend level.
Nick Coulter: Sorry, on the franchise?
Alexandre Bompard: Concerning, yes, of course, concerning your question on franchise. You are aware of the fact that, of course, this share is growing regularly through two main elements. The most important one is the openings of convenience stores. As you know, almost 100% of our convenience stores are open in franchise, and we continue to open at a very steady pace new convenience store each year. So of course, it fuels a higher share of the franchise in our model. And in the meantime, we transfer each year 15 -- 16 or 15 depending on the -- hypermarket into lease management contract, hypermarket that cumulate huge difficulties around 15 each year and between 20 and 25 supermarket. All in all, it means, of course, that we have more stores in franchise. And today, franchise account for almost 50%, 5-0 percent of our revenue in France in 2023. So the number of stores increased. On the revenue of franchise accounts for 50% of our revenue.
Operator: And your next question comes from the line of Frederick Wild from Jefferies. Please go ahead.
Frederick Wild: Good evening, Alexandre Matthieu. Three from me, please. Matthieu, could you give us a bit more detail on your CapEx outlook and the uses for that cash, please? Second, you mentioned that volume trend expectations in Brazil were lower than you expected. How are those developing now? And how have you adjusted your expectations of volumes in that market going forward? And then finally, on the outlook in 2024 for the Other Europe margin. It's obviously some markets if you built in Poland quite challenged. Do you see those recovering next year? I mean you've got also assumably quite a bit of help from those EUR 170 million of energy costs. So can we look to margin expansion in other Europe as well?
Matthieu Malige: Thank you, Frederick. Do you mind repeating your first one, the line was not good.
Frederick Wild: Sorry. Hopefully, you can hear me now. It was just about a bit more detail on the CapEx outlook for next year and the uses for that CapEx.
Matthieu Malige: So I'll -- maybe I'll start with this one. So indeed, we're expecting a EUR 1.9 billion of CapEx for this year, which so EUR 50 million higher than what we had in 2023. Well, we have a number of integrations to make this year, notably Cora in France, the 31 Casino stores. We have the Cora Romania also where we have CapEx to be incurred there. And the 47x stores. So a portion of that will be devoted to this integration as we had last year, conversion and integration CapEx from the Grupo BIG integration. Then the balance will be roughly similar as what we had in 2023, with maybe a little increase of CapEx on energy reduction projects in order to make some savings and in order to reach our ESG objectives.
Alexandre Bompard: On your second question, I think the line is not very good, but the volumes in Brazil. Brazil has faced a very tough environment with a phase of high inflation and increase in interest rates, which has put a strong pressure on our customers and put pressure on the whole sector. Today, what we see is that food inflation is nil and rates are decreasing. So I would say, in a parallel way than in France than in Europe, we see that purchasing power is improving in Brazil, which starts to be visible in the delinquency indicators at Banco Carrefour that are improving. So it seems we have the conviction that we are heading in the right direction. Things are moving the right way. We should point to some improvement in volumes. But as you know, Brazil is a pretty volatile country, and we need a bit more time to confirm the spot, but we are moving the right way with a stabilization in volumes and less trading down but it may take some time.
Matthieu Malige: And your last question was on the outlook for other Europe in terms of margins. So we're not going to be -- there, but you understand that we are quite confident in our commercial dynamics in a number of regions. We've had a disappointing performance of Poland on the back of high historicals. So we'll see how it develops, but we have a number of profiting elements, positive elements at play.
Operator: And your next question comes from the line of Clement Genelot from Bryan Garnier & Co. Please go ahead.
Clement Genelot: Yes, thank you. Just three from my side. So the first one on prices. Are you all referring to a potential rollout of a new pricing well that you will have tested at a -- as revealed by Olivier there? What can you say about this new pricing. Does it fulfill your expectation your expectations and how much does it cost on the P&L? The second question is whether on the French EBIT guidance. Just to clarify, are you targeting an increase, including or excluding the real integration of Cora and Match. And finally, on the French IFRS. can you share a bit of color on IFRS following all the ways of transfers towards lease management. If I'm right, the union said that the IFRS were quite close to have a breakeven level of last year 2022. So what's about welfare they already at breakeven or still negative
Alexandre Bompard: Thank you. About your first question. As I said, we have been taking several initiatives in the Q4 and the objective of this area of initiative is really clearly to reinforce our competitiveness. The one you mentioned is part of them. I'm sure you will understand that I will not comment specifically because it's something quite commercially sensitive. The only thing I can tell you, which is about, is that we are very satisfied with the initiatives we are implementing. They contribute quicker than we thought on stronger than we thought to the improvement of NPS, and we plan to carry on in 2024.
Matthieu Malige: On your second question, the comment on the improvement of the French profitability obviously excludes the benefits of the consolidation of CAR. So it's really on the historical French perimeter. And your last one, Clement, on the profitability of Hyper, so obviously, we don't share any information on that part.
Operator: And your next question comes from the line of Francois Digard from Kepler Cheuvreux.
Francois Digard: I have a follow-up on the French cadence, again, sorry. You are integrating as well a few stores from Casino this afternoon, LSA, the French newspaper, mentioned that the loss-making in the magnitude of circa EUR 50 million. Could you confirm that or not? Or is your guidance includes these losses? My second question would be about Europe. I've been quite surprised by the magnitude of the Polish effect. Could you give us a bit more color, knowing that spend that is much larger than Poland had been quite successful. I've been surprised by the flattish margin in Europe. And the last question, could you quantify the retail media contribution? You mentioned it as a positive contributor to your performance in '23, so it would be very appreciated if you could make a bit of color on figures in that.
Alexandre Bompard: Thank you. I have to admit my lack of competence. I don't know at all the publication you mentioned, but it must be very interesting, but just to come back. As you know, we agreed with Intermarché on the acquisition of 31 Casino store, six directly from Intermarché 25, for which we will substitute Intermarché. The idea is to close in Q2. Of course, it's subject to regulatory approval. And the idea is that this store will be converted to Carrefour banner on May and all employees would be transferred to Carrefour France. These stores will generate sales of EUR 400 million in 2022. And of course, we are absolutely convinced and confident in our ability to boost them. Thanks to the implementation of our strategy on our model. Relating the ROE, of course, you realize it's a very, very small subject. But clearly, what we do think is that we'll be able to implement our model is, of course, far more competitive and to improve both the sales and the profitability.
Matthieu Malige: On Poland, Francois, so please keep in mind that the level of profitability we had reached in 2022 was very high. We know how particular the situation in the country was in 2022, nothing specific to report as far as 2023 is concerned, pressure on purchasing power, increasing cost of energy, nothing more than that. On Retail Media, of course, it was a very important year. As you know, with the launch of Unlimited. Our common business with Publicis. We are very satisfied with the first steps. We managed to attract other retailers in this project. And as you know, the scale is so important. And we are so satisfied about our capability to attract our retailers. So we are really growing per plan. We are also on track to reach the objective we fixed during the Digital Day, which is EUR 200 million of work objective. The promising results are satisfying us. And we will continue to push for that. And as you know, we have huge confidence about the potential of this activity on about
Operator: We will now take our last question. And your last question for today comes from the line of Nicolas Champ from Barclays.
Nicolas Champ: I have two technical ones. The first one is about your net financial results that was significantly down last year. I just wanted to confirm the magnitude of the one-off profit related to age instrument in Argentina. I think on Slide 21 of your presentation for the free cash flow generation, you mentioned EUR 50 million, 5-0 of gains on deposits in Argentina. Is it the same number that benefited your net financial result last year? And so a follow-up question is how do you see your net financial results will evolve in 2024? And the second question is again a follow-up question on the working capital improvement, which is quite significant as well. Is it fair to say that the bulk of this working capital improvement came from Brazil or not?
Matthieu Malige: Thank you, Nicolas. So you're right, the net financial result decreased EUR 80 million. And it does include the EUR 50 million that we would note somewhere in the presentation, which was ForEx gain on our net cash position in Argentina, plus short-term interest on deposits, notably following the cash in from the divestment of our stake in Taiwan. I'm not going to forecast 2024 on that one. I don't have a very precise view on the evolution of the currency of the rates and potential further devaluation in Argentina. So I won't go on that one. Working capital improvement came from all geographies. I don't have in mind that it came specifically from Brazil. So I think it's -- again, it's a global effort to improve our inventories, which was shared across most countries.
Operator: Thank you. I will now hand the call back...
Alexandre Bompard: Thank you very much for this discussion, and I'm sure we will have new opportunities to continue this exchange. Thank you so much.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.