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Carrefour shares leap on hypermarket revamp hopes

Published 09/17/2010, 03:42 AM
Updated 09/17/2010, 03:44 AM

* Shares up 4.9 percent, top European blue-chip gainer

* Analysts up 2013 profit forecasts after company guidance

* Firm's 2013 profit guidance almost 25% ahead of consensus

PARIS/LONDON, Sept 17 (Reuters) - Carrefour shares jumped 5 percent on Friday after the world's No.2 retailer unveiled a revamp plan for its European hypermarkets which it said could more than double profit by 2015.

The French group, battling to reverse years of underperformance in its main western European markets, said late on Thursday it expected operating profit to reach 5.2 billion euros ($6.8 billion) by 2013, almost a quarter ahead of analysts' forecast, according to ThomsonReuters I/B/E/S.

Profits could reach 6.4 billion euros by 2015, more than double the level achieved in 2009, it said.

"After visiting two of the trial stores we are confident that the concept will succeed in winning new customers and deliver a richer mix of sales," said Liberum analyst Simon Dunn, after Carrefour showcased its 1.5-billion-euro plan to "reinvent the hypermarket" to analysts and investors.

"The low capital cost, high returns and a short payback period of this initiative are appealing," he said, raising his 2013 profit forecast by 15 percent and lifting his share price target to 50 euros from 45 euros.

At 0730 GMT, Carrefour shares were up 4.9 percent at 40.1 euros, the biggest riser on the FTSEurofirst 300 index of top European shares.

However, Execution Noble analyst Caroline Gulliver said Carrefour, which makes over 60 percent of sales from hypermarkets, had set the bar very high.

"These targets are demanding. Carrefour's executive board has a big task ahead of them if their credibility is not to be damaged," she said.

She also noted that Carrefour's profit targets assume it can retain almost all of the cost savings it hopes to achieve over the coming years and that, so far, it hasn't managed to do this.

Austerity measures, a fight-back from competitors and a recent disappointing performance from Carrefour's Brazilian hypermarkets were all risks to the profit target, she added.

Bernstein's Chris Hogbin also highlighted the risks and kept a "market perform" rating on Carrefour shares, noting it will be some time before investors can know whether the plan will work.

"With the roll-out of Carrefour Planet (the new hypermarkets) not starting until next year, there will be no immediate proof that the concept is delivering against the forecasts provided by management," he said. (Reporting by Mark Potter in London and Dominique Vidalon in Paris; Editing by Michael Shields)

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