Carrefour shares gain 7% on Q2 beat, full-year guidance maintained

Carrefour (EPA:CARR) shares surged over 7% after the retailer significantly beat second-quarter sales and earnings expectations, reporting 4.4% like-for-like sales growth and H1 underlying EBIT above consensus. The company also announced the strategic sale of its loss-making Italian operations for approximately €1 billion, incurring a €460 million impairment charge in the first half. Despite this charge and some integration impacts, Carrefour reaffirmed its full-year guidance for slight growth in EBITDA, ROI, and net free cash flow, driven by €610 million in H1 cost savings.

Analysis

Carrefour delivered a robust second-quarter performance, significantly outperforming market expectations and triggering a more than 7% rise in its share price. The group's 4.4% like-for-like sales growth comfortably exceeded the 2.7% consensus forecast, driven by notable strength in its core French market where hypermarket and supermarket sales beat pessimistic analyst estimates. First-half underlying EBIT of €681 million also surpassed consensus, highlighting effective operational management despite an 8.5% year-over-year decline in reported terms, which was attributed to currency effects as EBIT remained flat on a constant currency basis. A key strategic development is the agreed sale of its chronically underperforming Italian operations for €1 billion, a valuation above Barclays' estimate. This move is poised to improve the group's profitability and cash flow profile, even with the upfront €460 million impairment charge. While performance in Latin America lagged consensus, the company's aggressive cost-saving program, which is on track to deliver €1.2 billion for the full year, and the reaffirmation of its guidance for slight growth in EBITDA, ROI, and net free cash flow, provide a solid foundation for investor confidence.

Key Decisions for Investors

• The strong top-line beat and divestment of the loss-making Italian unit at a favorable price validates management's strategy, suggesting that the current positive momentum could be sustained.
• Investors should monitor the performance of the Latin American division, which missed consensus estimates, and closely track the financial impact of the Cora and Match integration as a potential near-term drag on profitability.
• Given the reaffirmed full-year guidance, the focus should be on the company's ability to execute on its cost-saving targets and improve margins, which will be critical for justifying further upside in the stock.