Analyst Note| Ioannis Pontikis, CFA |
Carrefour reported first-half 2022 results with group like-for-like sales up 5.4%, despite strong comps (up 7.3% in the second quarter of 2022 versus up 3.6% in the same period last year). Within this, France reported 1.4% like-for-like growth in the second quarter, weighed down by negative 0.5% like-for-like growth in hypermarkets, but against a tough comparable base (the second quarter of 2021 was up 4.3% for the channel). Supermarkets faced similar headwinds with like-for-like growth down 0.7% (versus up 7% in the second quarter last year), while trends for convenience stores were strong, growing by 10.1% on a like-for-like basis (versus negative 3% in the same period last year). Brazil was strong (up 19.4% like-for-like growth and a positive contribution of 15.6% from acquisitions and new openings) with market share gains and volume expansion despite tough comparables. Europe's like-for-like growth was up 3.8% with all countries, but one, contributing to positive growth (Belgium was down 4.8% as expected). Management reiterated guidance on free cash flow ("comfortably above EUR 1 billion per year" versus EUR 1.8 billion in our model), but did not provide one for group EBIT (though they commented that consensus for operating profit of EUR 2.49 billion is consistent with trends, versus EUR 2.415 billion in our model). Carrefour also confirmed its capital expenditure guidance of EUR 1.85 billion including EUR 150 million related to the integration of Grupo Big in Brazil, in line with our estimates. Notably, the grocer confirmed continued strength in food e-commerce growth, which was up 22% in the second quarter after being up 10% in the first quarter and compared with a 56% rise in first-quarter 2021. We raise our fair value estimate to EUR 18.40 per share from EUR 17 after incorporating Grupo Big in our Latin America estimates and associated synergies as well as accounting for time value of money. At current levels, shares trade in 3-star territory.