Carrefour to Revamp Apparel Division

PARIS — Carrefour SA, the world’s second-largest retailer behind Wal-Mart Stores Inc., will radically overhaul its apparel division as part of a revamp of its hypermarket operations in France, chief executive officer Lars Olofsson said Friday.
“We will have to change our textile [business] quite dramatically. We will have to inverse basically what we’re doing,” Olofsson told analysts and journalists. His statements came a day after Wal-Mart revealed it was re-evaluating its entire apparel merchandising strategy after a disappointing performance.
Reporting full-year 2009 results, Carrefour said net income fell 74.2 percent as it absorbed more than 1 billion euros in nonrecurring impairment and restructuring charges.
Since his arrival one year ago, Olofsson has implemented measures to cut costs and improve the retailer’s price image. Last month, he appointed former Tesco executive James McCann as executive director for France, charged with tackling underperforming hypermarkets in its home market, which accounts for 40 percent of the group’s sales.
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Olofsson said Carrefour’s new apparel direction would start taking shape in 2011 or 2012, and likely shift from its current purchasing model toward a shorter cycle, placing Carrefour in competition with fast-fashion retailers like Sweden’s H&M and Spain’s Inditex, operator of the Zara chain.
“We will have to start designing more ourselves. We will have to start a short circuit so that we can have another rhythm in our stores, perhaps one month, six weeks,” he said. “There will always be basic clothing — be it jeans, T-shirts, whatever it is — but there is the whole rest, which is today being taken by some of the specialists, where we really have a reason to be. For that, we have to redesign completely our business model in textiles.”
Net income in the 12 months ended Dec. 31 came in at 327 million euros, or $456 million, versus 1.27 billion euros, or $1.77 billion, in the year-ago period. Dollar figures were converted at average exchange rates. The charges, totaling 1.07 billion euros, or $1.49 billion, reflected store closures in Italy and other restructuring costs as the company aimed to kick-start business in a difficult market.
Full-year sales, excluding value-added tax, slid 1.2 percent to 85.96 billion euros, or $119.89 billion, from 86.97 billion euros, or $121.29 billion, with revenues climbing in Latin America and Asia, but sputtering in Europe, including France. “I don’t see any significant improvement in the short-term economic environment,” said Olofsson.
Olofsson said he was satisfied with the implementation of his strategy so far, though he acknowledged there was room for improvement. “There is now momentum within Carrefour,” he said. “Yes, we are losing share in France. Yes, we are losing speed in some of the Western European markets and we need to update the concept. I will come back on this, but let me say that we are on track on these different initiatives.”
The group plans to invest 2.2 billion euros, or $2.99 billion, in 2010, roughly stable versus last year, Olofsson said. Most of its efforts will go into rolling out its Carrefour City, Carrefour Express, Carrefour Market and Dia banners in France, Spain, Italy and Belgium, and continuing to expand in fast-growing China and Brazil.
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