Business | Retail

Carrefour to cut staff, wages

Europe’s largest retailer by sales has struggled in recent years

  • AP
  • Published: 17:26 August 30, 2012
  • Gulf News

  • Image Credit: Reuters
  • Customers in a Carrefour supermarket in Montreuil near Paris. The retailer’s new chief executive said the company needed to retrench in the areas where it has succeeded: providing low prices in big box stores that are generally outside cities.

Paris: Carrefour will have to cut staff and wages but won’t retreat from its model of offering everything from vegetables to dishwashers under one roof, new CEO Georges Plassat said on Thursday, as the French retailer announced as loss of 31 million euros (Dh146.2 million, $39 million) in the first half.

Europe’s largest retailer by sales has struggled in recent years, hit hard by the economic crisis but also flawed management that led to rising costs, higher prices and a now-abandoned plan to rebrand some stores as high-end. Plassat has been called in to turn around the operations — not the first time the company has tried to reverse course in recent years.

Known as “Georges the Cleaner” for his penchant for ruthless cost-cutting, Plassat did not disappoint on Thursday at his first presentation of results as the company’s chief executive. He promised to root out waste, to cut 500 to 600 jobs with a buy-out plan and to rethink compensation with an eye to reducing bonuses — all while drawing laughs from analysts and journalists for his biting if oblique references to the follies of his predecessors.

On the other hand, he vowed not to cede on what he called the raison d’etre of the company: providing one-stop shopping in large hypermarket stores. He repeatedly said the company needed to retrench and simplify in the areas where it has historically succeeded: providing low prices in big box stores that are generally outside cities.

That is a marked departure from recent group strategies that have included putting corner stores in cities and trying to pitch some Carrefour stores as more upmarket, under the brand Planet. He promised to throw out that brand and seemed particularly vexed by its English spelling and by the practice in recent years of the company’s foreign executives to hold presentations for analyst in English. Carrefour would not relinquish its “French character,” he vowed.

Plassat’s Frenchness is considered one of his biggest assets. He replaced Lars Olofsson, who is Swedish. James McCann, an Englishman, had been in charge of the stores in France for a while under Olofsson.

But the task ahead of him is massive. The company has progressively become less price-competitive in recent years — a loss that has hit the company particularly hard as consumers seek out cheaper goods during an economic downturn. While it has managed to turn around operations in Brazil, its operations in China are flagging at a time when European companies need their emerging market stores to make up for losses on their home continent.

For example, recurring operating income fell 4 per cent in Asia in the first half of the year — a drop that the company blamed on rising wages in China.

Plassat promised to simplify Carrefour, and it looked as if he had already had. The company recently pulled out of Greece - selling its stake in Greek supermarket chain Marinopoulos - and will close its two stores in Singapore by the end of the year.

The company blamed its first-half loss on those two sales. Not including discontinued operations, the company would have posted a net gain of 199 million euros. In the first half last year, the company lost 249 million euros.

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