Carrefour Sa

Good day and thank you for standing by. Welcome to the CAFAR Q1 2024 sales 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. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mathieu Malige, Chief Financial Officer. Please go ahead, sir.

Thank you. Good afternoon to all of you, and thank you for attending this Q1 2024 sales call. I'm here with Sébastien Valentin, Head of Investor Relations, and the rest of our IR team. Let me start with a few key highlights before we get into the details of Carrefour's Q1 performance. The quarter was marked by the following elements. First, an inflection in Brazil with a return to sales growth. Then, broadly stable revenue in France and Europe, primarily driven by the slowdown in food inflation across all markets, and continued strong momentum in Argentina. Overall, sales were up 13.5% on a like-for-like basis over the quarter. A key highlight of the period was investments in competitiveness, notably in France, which we intensified since the beginning of the year. These investments are already visible, translating into an improvement of our price positioning in the market. This contributed to an increase of six points in customer satisfaction at group level, as measured by the Net Promoter Score. In view of this, we decided to intensify and accelerate price reductions throughout 2024. At the same time, we are heightening our cost reduction dynamics with a new objective of $1.2 billion for our 2024 cost savings plan versus $1 billion initially. That increase is made possible by the strong momentum we have on current actions, which are rolled out at a rapid pace, and by incremental measures. This gives us confidence in our capacity to increase our investments while preserving our financial model. In addition, Carrefour continued to implement its 2026 strategic plan with new progresses on key initiatives. Carrefour branded products continue to grow at a rapid pace. They now represent 37% of food sales up two points versus last year. E-commerce GMV grew 33% in Q1, driven once again by a strong 52% increase in Brazil and double-digit growth in France. In light of these Q1 achievements, we confirm today our full-year financial objectives, including growth in EBITDA and recurring operating income, and a net free cash flow in line with the Carrefour 2026 plan trajectory as presented last February. Let's now dive into Q1 numbers, starting on slide 3 with group sales. Total sales for the quarter reached €22.2 billion, increasing by 12.1% at constant currency. Group like-for-like sales were up 13.5%. Expansion and M&A had a negative contribution of 0.4% over the quarter, many as a consequence of transfers to franchise and lease management and store closures in Brazil. Petrol contributed negatively for minus 2.3%, driven by lower volumes. The positive calendar effect of 1.4% reflects the leap year and the timing of Easter in March this year, versus April last year. Forex had a strong unfavorable impact on total sales growth of minus 11.8% over the quarter, essentially reflecting the depreciation of the Argentinian peso. In total, reported revenue was up 0.4% in Q1. Before reviewing our different markets in more details, let's have a quick look at food inflation in Europe on page 4. The sharp slowdown in inflation that started in Q2 last year continued, dropping to a low single-digit number in most European markets in March. Moving on to more details on France on slide 5. In this context of slowing inflation, light for light sales were slightly down. at minus 0.4%. Customer purchasing patterns were in line with the previous quarters, including more trading down and volumes in the market remaining negative. Food sales were slightly up in Q1, offset by more pressure on non-food. As mentioned during our full year presentation, we amplified the price investments that we initiated in Q4. At national level, More than 700 Basics products have seen substantial price reduction during the quarter. We will continue with new waves of price reduction every other week until the end of the year. Besides these national waves, other price initiatives are being implemented at store level with good success. In parallel, our cost savings plan is being implemented at a rapid pace and that said, we decided to take additional measures. With that, we are confident that we can sustain these investments in our competitiveness while maintaining growing profitability in France this year, both in absolute terms and as a percentage of sales. Moving on to Europe on slide six. Like-for-like sales were globally stable over the quarter, with some company patterns among geographies. First, inflation slowed materially in all our markets by more than three points on average compared to the previous quarter, which explains softer top-line trends. Second, we see strong competition in all our markets, and we're very active to make sure we maintain the right level of competitiveness. Here again, our investments are funded by the strong momentum on cost savings notably driven by good progress on European mutualization. We now have 20 international suppliers on our Eureka European purchasing platform. In this context, the best performing countries in the quarter were Spain and Romania, with like-for-like sales growth driven by solid increase in food sales of respectively 1.2% and 2.1%. In Belgium, commercial momentum remained very good during the period, with light-for-light sales up plus 4.3% in January and February. This was offset by a well-anticipated decline in March on very high comps, as March last year had benefited from disruptions at a competitor. The performance was tougher in Poland, with a decline of minus 4.2% light-for-light, in a context of increased price competition in the country since the beginning of the year. Let's move on to Latin America on slide 7. The quarter was marked by return to growth in Brazil in a context of positive food inflation with strong improvements in all formats. Like-for-like sales increased 1.3%. Atacadao, which accounts for 70% of our activity, delivered a solid 1.8% like-for-like sales growth, driven by both B2B and B2C sales. The ongoing rollout of service counters, such as bakery, butchery, and cold cuts, is meeting great success with customers. They are now rolled out in about 60 stores, and we plan to double that number by year-end. The retail division is also showing sequential improvement with a slight minus 1.4% drop in like-for-like sales over the quarter. Here again, our sales help initiatives are bearing fruit, including giving a more discount flavor to the stores, notably with the offering of some Atacada or Entry Ranch products on the shelves. SaaS Club keeps delivering strong performance with like-for-like sales of 6.9%, and a 33% increase in active members over the quarter. E-commerce GMV in Brazil keeps increasing at a high pace. It was up 52% in Q1 and particularly buoyant at Atacadao and Sam's Club. Lastly, the bank also showed positive dynamics with 22% growth of the credit portfolio over the quarter. After a tough 2023, marked by the rapid integration of GroupoBig in an adverse business and macro context, we now see most signals turning to green in the country. The converted stores keep ramping up rapidly, with another plus 21% like-for-like sales growth for the new Atacadao. They now contribute to earnings and margin growth. We continue to restructure the retail segment, Four Carrefour stores and one Bonpresso were converted to Atacadao last quarter, and nine more are currently undergoing conversion work. In addition, all the 123 unprofitable hypermarkets, supermarkets, and tododias we decided to close or sell have now been restructured. Our strategic initiatives are producing material results, both in terms of top line and cost. With this, we're confident that 2024 will be a strong year for Brazil and will provide clear evidence of the relevance of our investments in the country. A quick word about Argentina, where we keep delivering outstanding growth in a very high inflationary environment, notably with a strengthening of our price leadership. If you worked on our 700 million euro share buyback program on slide 8, As mentioned, this program is well underway. We have already repurchased 29 million shares to date for a total amount of 428 million euros. This includes 25 million shares bought from our shareholder, Galfa, as announced last month. We will receive these shares at the end of May after payment of the dividend. To date, the net number of outstanding shares amounts to 600 In summary, Q1 showed further progress on all key pillars of our strategic plan. Our investments in competitiveness are being well executed and we decided to strengthen our efforts on the matter, which will be financed by incremental cost savings, with a new objective of 1.2 billion for the full year. Sales in Europe have stabilized with a sharp slowdown in inflation, now at the low single-digit levels in all our markets. Recovery in Brazil is well underway, giving us confidence in the strong rebound in profitability expected this year. In view of all this, we're happy to confirm today our financial objectives for the year. That said, I want to thank you for your attention. Sébastien and I are 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 Brova from Morgan Stanley. Please go ahead.