Carrefour Sa

Thank you. Good afternoon to all of you, and thank you for attending this Q3 2023 sales call. Let me start with a few key highlights before we get into the details of our third quarter sales. Sales grew 9% on a like-for-like basis over the quarter, slightly below the Q2 level of plus 10.3%. The sequential slowdown primarily reflects the slowdown in food inflation in Q3 versus Q2. Aside from lower inflation, we saw a continuation of the trends and shopping behaviors observed in recent quarters, notably trading down and declines in volumes at similar levels. In this context, we posted solid top line momentum notably driven by our key strategic initiatives. Private label products kept resonating particularly well with customers seeking value. In Q3, they represented more than 35% of all sales, a strong increase of three points compared to Q3 last year. This is driven by both the traditional Carrefour private label brands and our simple entry price range. E-commerce performed well, with GMV up 31% in Q3, driven by a sharp increase in Brazil and double-digit growth in France. Along with these commercial initiatives, Carrefour kept adapting its operating model to declining volumes and trading down. We made good progress on our cost savings program in line with plan, allowing us to confirm today our €1 billion cost-saving objective for the full year. In Brazil, the integration of GroupOB continues to progress well, notably regarding the ramp-up of converted stores, as I will detail in a minute. Once again, we confirm our synergy target of R2 billion of EBITDA by 2025. In light of Q3 achievements and assuming the continuation of the recent business trends in Q4, We confirm today our financial objectives for the current fiscal year, i.e. growth in EBITDA, recurring operating income, and net free cash flow versus 2022. Inflation remains the key parameter shaping the industry in Europe. Let's see how it has developed recently on slide three. As you can see, the slowdown we highlighted at our H1 results last July was clearly confirmed in Q3, and even gain pace in France and in Italy. Food inflation now averages about 10% year-on-year in our European market, and we expect the decrease to continue in Q4. Now, as you can see on slide four, cumulative inflation over two years shows that consumer prices have remained globally stable since the beginning of the summer. Cumulative inflation over two years is high, between 20% and 30% in our European countries. These highlights continued pressure on purchasing power. Let's now dive into Q3 numbers, starting on slide 5. Sales for the quarter reached 23.6 billion euros, increasing by 6.9% at constant currency. Group like for like sales were up 9%. Expansion on M&A, which include conversions to franchise and lease management, had an impact on total sales growth of minus 0.7 points over the quarter. Petrol contributed negatively for minus 1.5%, mainly driven by lower volumes. Forex was a negative 6.4% over the quarter, primarily due to the depreciation of the Argentine peso. In total, reported revenue was up 0.5% in Q3. Moving on to a more detailed look at the performance in France on slide six. Lycolite sales increased by 4.3% over the quarter. Food sales were up 5.7% versus 8.5% in Q2. This sequential slowdown essentially reflects the three-point decrease in food inflation over the quarter while volumes remained slightly negative. Non-food sales were down minus 6.8% in the quarter. All formats posted satisfactory growth, including hypermarkets, which delivered solid growth of 4.2% like-for-like, reflecting their discount positioning. E-commerce GMV increased by 16% in Q3, which is above previous quarters. We continue to transform our model. After completing the transfer of company-operated to lead management of all 16 HYPRs plans for 2023, we recently presented the 2024 plan, which includes an app portfolio of 16 HYPR markets and 21 supermarkets in line with what we did in previous years. Europe delivered another satisfactory performance, as you can see on slide seven. Like-for-like sales increased by 4.1% in Q3. As we just saw for France, the sequential slowdown in Europe versus the 7.4% like-for-like growth posted in Q2 is mostly explained by lower food inflation, which was 3.6 points below the previous quarters on average. Customer behavior also remained fairly unchanged in our other European countries. Like-for-like sales in Spain increased by 5%, with food sales up 7.7% and non-food slightly negative at minus 2.9%. We continue to benefit from our dominant hypermarket format, whose discount model resonates well with Spanish customers. Our Italian business continues its positive momentum with 1.7% like-for-like growth, reflecting improvements in all key operating metrics, including price positioning, price image, and net promoter score. Belgium continues to recover at a good pace. We recorded new market share gains in Q3 and delivered very satisfactory like-for-like sales growth of 7.5%, notably thanks to successful commercial initiatives. Like-for-like sales in Poland were down minus 3.9% in Q3 on the back of very high comps. Lastly, Romania remains strong in Q3 with like-for-like sales of 4.5% with a sound increase in traffic in hostels. Last week, we received full clearance from the Romanian competition authorities for the acquisition of Cora Romania with no remedy. This is very good news. The transaction should therefore be completed in the next few weeks. Moving on to Latin America on slide 8, starting with Brazil. Like-for-like sales in Brazil were down minus 3.7% in Q3. As a reminder, Q3 was the first quarter in which GroupoBig was fully integrated in like-for-like numbers as the acquisition was completed in June 2022. The quarter was shaped around month-to-month food deflation, which started in June and accelerated through Q3. This translated into year-on-year deflation since August. In that context, like-for-like sales at Atacadao were down minus 2.7%, a sequential improvement versus Q2, resulting from two main drivers, First, a stable trend for the legacy stores versus Q2 at around minus 4.5%, which is a clear positive in view of the deeper food deflation. It also reflects better volume trends. And then, a sharp wrap-up at Group B converted stores, which delivered strong 22% like-for-like growth in Q3. The ramp-up is very much in line with our expectations and historical patterns for new cash and carry stores. This applies to top line as well as to profitability, with more and more converted stores generating positive EBITDA as planned. In this context of strong pressure on purchasing power, the situation was tougher for retail stores, which were also facing higher comps. On retail, note that the gap between like-for-like and reported sales growth is linked to the conversion of 35 hypers to cash and carry, including a large majority of former big stores, as well as three former Carrefour hypermarkets. The performance was very satisfactory at Sam's Club, where like-for-like sales increased by 2% in Q3, in addition to five stores converted from group of big hypermarkets. driving total sales growth of plus 8.7%. Efforts to expand the active membership base were successful and led to a 10.2% year-on-year increase in members, notably driven by customer acquisition through the digital channel. So SAP's club proved to be a powerful format once again. We see strong potential to grow the brand in the country with further openings planned. E-commerce and financial services did remarkably well for the quarter, primarily benefiting from the integration of Groupo Big and its customer base, which is progressively embracing our digital services. All former big stores are now fully integrated into our digital platforms, which clearly supports GMV growth. This also applies to Banco Carrefour. As we continue to convert former big clients to our services, across all formats, including Sam's Club. Our credit portfolio is 26% larger than last year. In Argentina, business remains very solid, with positive volumes and market share gains for Carrefour. Like-for-like sales were up 141% over the quarter in a context of very high inflation. So as you can see on slide nine, the acquisition of Grupo Big is starting to bear material fruit. All this gives us confidence to confirm our two billion real synergy target by 2025. A few words now on our CSR initiatives during the quarter in the framework of our CAFOR 2026 strategic plan, as you can see on slide 10. We keep implementing our objectives on climate with a target of reducing greenhouse gas emissions linked to products by 30% in 2030. One of the drivers to reach our target is to develop the sales of alternative plant-based proteins. In Q3, we teamed up with seven major manufacturers, including Danone and Unilever, to accelerate on this topic with a global objective of generating a combined 3 billion euros in sales from alternative plant-based products by 2026. Another key pillar of the Carrefour 2026 transformation plan is inclusion and diversity. This quarter, we were particularly active on the topic of visibility with initiatives in stores at Carrefour for our employees and for the broader community. Moving on to slide 11 with a final word on our 800 million euro share buyback program. We are now well advanced on execution with repurchases to date of 664 million euros or 38.2 million shares. This morning, our board of directors confirmed the cancellation of 11.2 million shares. After this cancellation, the total number of net outstanding shares will amount to 699 million. With that said, I thank you for your attention, and I'm now happy to take your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to your first question. One moment, please. And your first question comes from the line of Isabel de Brieva from Morgan Stanley. Please go ahead. Hello, good morning.

Thank you very much for the presentation. I had a couple of questions. My first one is on your guidance. So I think a number of market participants might be surprised that you have maintained your guidance. because I guess the deflation in Brazil has been worse than a lot of people thought it would be. So could you help us understand which part of the business is doing better than originally planned? Is it France? Is it the retail media? Or maybe your guidance had enough buffer in it to start with. So that's the first question. And then I have one more.