January 30, 2012 / 7:29 AM / 7 years ago

Carrefour picks retail veteran for new turnaround bid

PARIS (Reuters) - Carrefour (CARR.PA), Europe’s largest retailer, picked industry veteran Georges Plassat as its next boss, signaling key shareholders may back another attempt to fix its ailing hypermarkets rather than push for a break up.

A woman walks below the logo of Carrefour Planet supermarket in Bordeaux, southwestern France, January 19, 2012. REUTERS/Regis Duvignau

Plassat, the 62-year-old head of private equity-backed retailer Vivarte, will replace Lars Olofsson, who faced mounting criticism over a series of profit warnings that hammered the French group’s shares down 43 percent over the past year.

“The reference shareholders have been hesitating between restructuring the group or breaking it up. Plassat is the man of a restructuring,” said one analyst who declined to be named, referring to Carrefour’s top investors — French tycoon Bernard Arnault and U.S. private equity firm Colony Capital.

Speculation has long swirled that Olofsson’s departure could herald the break up of Carrefour, with the possible sale of its faster-growing emerging market businesses.

“Carrefour has lost the confidence of its managers, staff, suppliers and shareholders. Appointing a respected retailer at its helm polishes up the image of the board, which some critics have accused of conducting a short-term financial strategy,” CM-CIC analyst CM-CIC analyst Christian Devismes said.

Carrefour, the world’s second-biggest retailer behind U.S. group Wal-Mart (WMT.N), has been struggling for years, partly due to its reliance on hypermarkets, which have been losing out as time-pressed shoppers buy more goods locally and online, and prefer to purchase general merchandise from specialist stores.

Olofsson’s main response was Carrefour Planet, a costly revamp of the stores that has so far not yielded the necessary results and is likely to be scaled down in March amid a worsening economic climate.

A new CEO might pursue an alternative strategy for the hypermarkets, like downsizing them, slashing prices to lure back cash-strapped shoppers who think that Carrefour products are too expensive and investing more in e-commerce, analysts said.


Plassat, who will join Carrefour on April 2 as chief operating officer before becoming CEO at a shareholder meeting on June 18, spent 14 years at French retailer Casino (CASP.PA) and two years at Carrefour Spain before joining Vivarte in 2000. He holds a stake of about 10 percent in Vivarte.

Analysts said his depth of experience in both France and general merchandise could help address Carrefour’s key problems, in contrast to Olofsson, who came to the company from a career largely in marketing at Swiss food giant Nestle NESN.VX.

“The appointment of Plassat should be viewed as a big win for Carrefour,” said Natalie Berg, director of global research at Planet Retail. “He is a seasoned retail executive with the non-food experience that Carrefour vitally needs.”

However, she said Plassat faced an uphill struggle in a world where giant stores are out of fashion and you need to give shoppers a good reason to make that out of town trip.

“Carrefour’s business model is inherently flawed given its over dependence on a dated format and slow-growth markets and a simple change at the helm will not be enough to save the company,” she said, predicting Plassat would “pull the plug” at least temporarily on the costly Carrefour Planet hypermarket.

Carrefour shares, which rose last week on talk of Plassat’s appointment, were down 3.15 percent at 17.68 euros by 1109 GMT.

“We think a ‘hope rally’ could be some time off, in the meantime the fundamental issues around underperformance, aggressive competition and weak macro have not changed,” said Espirito Santo analysts

In a note titled “Georges Plassat, who else?,” Natixis said the man had the right profile for the job but cautioned that investors would have to wait “a few months” to hear his diagnosis on how to revitalize Carrefour.


The board of Carrefour, which has annual sales of over 90 billion euros and 470,000 employees in 32 countries, will also consider Plassat’s nomination as chairman after the June 18 shareholder meeting. Olofsson was both chairman and CEO.

“Georges Plassat declared he is well aware of the magnitude of the task ahead, which will require the support of all within the company,” Carrefour said in a statement.

Natixis analysts said Plassat would need to address issues such as: “What future for Carrefour Planet? How to improve the price image, the e-commerce strategy, the country portfolio, employees motivation, decentralization of decision-making...”

Olofsson’s tenure was marred by a string of poor trading results, management defections and strategic U-turns including a failed merger in Brazil, as well as doubts over his flagship plan to revive Carrefour’s ailing hypermarkets. [ID:nL5E7MP0QY].

The Arnault-Colony alliance, known as Blue Capital, owns about 16 percent of Carrefour. It is sitting on hefty paper losses from the investment, which originated with a 2007 stake purchase for over 40 euros per share. The stock has fallen 24 percent since Blue Capital installed Olofsson in January 2009.

Editing by Mark Potter

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