Carrefour: 2020 Results Show Further Strong Growth; Carrefour commits to Net Free Cash Flow objective of above €1bn
- Solid growth momentum
- Record commercial performance in 2020 (+7.8% LFL): France (+3.6% LFL), Spain (+7.1% LFL) and Brazil (+18.2% LFL). Hypermarkets returned to growth in France (+1.0% LFL in 2020, +3.9% in Q4)
- Strong increase in customer satisfaction: Progression in Group NPS® accelerated with +12 points in 2020, after +8 points in 2018-19. NPS® ambition raised to +30 points(1) by 2022
- Heightened commercial competitiveness in the Group’s key countries. Best half-year of market share trend in France in the last three years; +0.1 point improvement in Q4(2)
- Steady improvement in profitability: Recurring Operating Income (ROI)(3) of €2,173m, up +16.4% at constant exchange rates in 2020(4)
- Increase of +€630m in retail activities ROI
- Food e-commerce activity growth (above +70% in 2020) now contributing positively to ROI and operating margin improvement
- Strong increase in cash generation: Net FCF(5) of €1,056m in 2020 (vs. €324m in 2019(4))
- Bolstered by the success of its transformation plan and confident in its model, Carrefour announces:
- A new target of €2.4bn in additional cost savings on an annual basis by 2023; target of €3bn by 2020 achieved
- A target of Net Free Cash Flow(5) generation above €1bn(6) per year from 2021
- The normalization of the dividend policy: €0.48 per share proposed, to be paid fully in cash, with the objective of growing the dividend regularly
- An explicit capital allocation policy combining operational investments, dividend payment and continuation of the bolt-on M&A strategy
MASSY, France–(BUSINESS WIRE)–Regulatory News:
Carrefour (Paris:CA):
Alexandre Bompard, Chairman and Chief Executive Officer, declared: “2020 has been a year of commitment for Carrefour. That of our teams, mobilized in the service of our customers, who have successfully taken on immense sanitary, logistical and human challenges. That of our entire Group, which consistently maintains the same level of extreme sanitary vigilance and the same attention to its social and environmental responsibility.
2020 was also a decisive year for Carrefour. In a crisis which is accelerating changes underway, our Group reached a watershed. Three years ago, the Carrefour 2022 plan marked a first turning point for our Group. Three years of flawless roll-out of our transformation have established a growth model that is based on customer satisfaction and new consumer trends. Today, this model ensures the sustainable dynamism of our sales and the profitability of our Group, and allows us to generate significant financing capacity to continue our development. Our 2020 results are evidence of this.
We are confident for the future, and translate this confidence into new operational and financial commitments.”
| Notes: (1) Since the beginning of the plan; (2) Based on NielsenIQ’s RMS data for total store value sales (excluding gas) for the 156-week period ending 27/12/2020 for the French total retail market (Copyright © 2021, NielsenIQ); (3) 2020 ROI includes income and expenses related to COVID-19 effects. Exceptional bonuses and similar benefits to Group employees (€128m in H1 2020) are accounted for under other non-current income and expenses; (4) 2019 comparison basis is restated for the IFRS IC decision on IFRS 16; (5) Net Free Cash Flow corresponds to free cash flow after net finance costs and net lease payments. It includes cash-out of exceptional charges; (6) With capex between €1.5bn and €1.7bn, vs. €1.2bn in 2020 |
2020 KEY FIGURES
| (in €m) | 2019 | 2020 | Variation |
| Sales inc. VAT | 80,672 | 78,609 | +7.8% LFL |
| Recurring operating income (ROI)(2) | 2,099 | 2,173 | +16.4%, +€343m |
| Recurring operating margin | 2.9% | 3.1% | +17bps |
| Operating income | 1,071 | 1,686 | +57.4% / +€615m |
| Adjusted net income, Group share | 858 | 1,011 | +17.9% / +€154m |
| Net Free Cash Flow(3) | 324 | 1,056 | +€732m |
| Net Free Cash Flow restated for exceptional items | 1,045 | 1,594 | +€549m |
| Net financial debt (at December 31) | 2,615 | 2,616 | -€288m (constant FX) |
| Notes: (1) 2019 restated for the IFRS IC decision on IFRS 16; (2) 2020 ROI includes income and expenses related to COVID-19 effects. Exceptional bonuses and similar benefits to Group employees (€128m in H1 2020) are accounted for under other non-current income and expenses (3) Net Free Cash Flow corresponds to free cash flow after net finance costs and net lease payments. It includes cash-out of exceptional charges |
SOLID GROWTH MOMENTUM
A record commercial performance
Leader in the food transition for all and driven by the profound transformation it initiated in 2018, Carrefour is now on a sustainable growth path, posting solid performance, particularly in its key countries (France, Spain and Brazil).
In 2020, with like-for-like (LFL) sales growth of +7.8%, Carrefour achieved its best performance in at least 20 years:
- In France (+3.6% LFL), all segments are growing: Hypermarkets (+1.0% LFL), supermarkets (+6.8% LFL) and convenience (+8.3% LFL)
- Very good growth momentum was confirmed in Spain with +7.1% LFL
- Brazil posted record LFL growth of +18.2%, driven by both Carrefour Retail (+19.6% LFL) and Atacadão (+17.6% LFL)
| LFL growth | Q4 2020 |
| FY 2020 | |
| Group | +8.7% |
| +7.8% | |
| France | +5.5% |
| +3.6% | |
| Hypermarkets | +3.9% |
| +1.0% | |
| Supermarkets | +9.8% |
| +6.8% | |
| Convenience | +5.9% |
| +8.3% | |
| Spain | +6.0% |
| +7.1% | |
| Brazil | +22.9% |
| +18.2% |
Strong increase in customer satisfaction, an asset for future growth
The dynamic of sustainable growth relies on high levels of customer satisfaction.
- In 2020, the Group’s NPS® increased by +12 points, after +8 points in 2018-2019
- At +20 points since the beginning of the plan, the Group is already close to its initial target of +23 points for 2018-2022 and thus raises its ambition to +30 points
- In France, NPS® increased by +16 points in 2020, including +17 points in hypermarkets and +18 points in supermarkets
- The improvement in NPS® notably reflects a better price perception, operational excellence and constant attention to customers
Strategic initiatives well aligned with current consumption trends
New consumption trends, well-identified in the Carrefour 2022 plan and amplified by COVID-19, support the Group’s growth momentum.
- Decisive advance in food e-commerce in 2020: Growth of more than +70% in food e-commerce GMV to €2.3bn and ambition to reach €4.2bn by 2022 confirmed
- Confirmation of the attractiveness of organic products: A leading player in this market, Carrefour posted revenue growth of +18% in 2020 to €2.7bn and confirms the objective of reaching €4.8bn by 2022. The Group took many initiatives, including the acquisition of the urban specialized banner Bio c’ Bon
- Strong dynamism of Carrefour-branded products: growing faster than the market, +2 points of penetration to 29% of 2020 sales. As drivers of purchasing power and price image, they should keep growing and represent one-third of sales in 2022
- Acceleration in growth formats(convenience, Cash & Carry and Supeco): With 1,874 openings at the end of 2020, Carrefour is on track to achieve its objective of opening 2,700 convenience stores between 2018 and 2022
Targeted acquisitions, a source of additional profitable growth
Bolstered by its strong balance sheet, its commercial and operational know-how and its strengthened market positions, Carrefour is positioned as a natural consolidator in the markets in which it is present. The Group is more attentive than ever to opportunities for moderate-sized acquisitions, offering perfect complementarity with its existing activities. The transactions announced during 2020 and carried out under attractive financial conditions are a perfect illustration of this strategy.
- Supersol: 172 supermarkets and convenience stores in Spain; completion expected in H1 2021
- Makro: 30 cash & carry stores in Brazil; partially completed (25 stores acquired, of which 6 already converted at end-2020)
- Wellcome: 224 convenience stores in Taiwan; completed on December 31, 2020
- Bio c’ Bon: 107 city center organic stores in France; acquired in November 2020
- Potager City, Dejbox and Bioazur completed in 2020
While remaining very selective, this targeted acquisition policy constitutes an additional source of profitable growth. The acquisitions announced in 2020, for an enterprise value of c.€760m, should contribute more than 2% of additional sales on a full-year basis.
STEADY IMPROVEMENT IN PROFITABILITY
Continuous cost savings momentum
Since 2018, the transformation dynamic has been accompanied by a culture of operational excellence and financial discipline. Carrefour thus achieved €3.0bn in annual savings in 2020 and has set itself a new target of an additional €2.4bn on an annual basis by 2023.
Carrefour is thus continuing to improve its purchasing conditions, both for goods for resale and not for resale, and continues to strengthen operational efficiency in stores and logistics, by relying on massification and process redesign.
Steady growth in operating income
Commercial momentum in retail activities is reflected today in robust operating leverage and an increase in recurring operating income from retail activities of c. +€630m at constant exchange rates in 2020. This virtuous growth should continue and thus drive steady improvement in profitability going forward.
In food e-commerce, the strong increase in volumes and better productivity are leading to a structural improvement in the business model. Food e-commerce growth contributed in 2020, and will continue to contribute, to the improvement in ROI and operating margin.
STRONG CASH GENERATION
Efficient investment policy and steadily reducing inventory
Selectivity and productivity efforts enable good control of the level of capex, while maintaining the quality of assets and the implementation of numerous development projects (notably in expansion and digital). In 2020, capex were reduced to €1,241m in the context of the sanitary crisis. Annual capex should amount to between €1.5bn and €1.7bn in the coming years.
The regular drop in the level of inventory also attests to the strong financial discipline.
Net Free Cash Flow1 objective from 2021 onwards
Good commercial momentum, combined with financial discipline, enabled the generation of Net Free Cash Flow of €1,056m in 2020, up +€732m compared to 2019.
Confident in its model of sustainable and profitable growth, Carrefour announces an objective of generating annual Net Free Cash Flow in excess of €1bn2 from 2021, after payment of exceptional charges.
NORMALIZED DIVIDEND POLICY
After almost ten years of offering the option of a scrip dividend, Carrefour is now in a position to normalize its dividend policy.
Hence, the proposed dividend for the 2020 financial year is 0.48 euro per share. It will be paid fully in cash and is subject to the approval of the General Meeting of May 21, 2021.
The ordinary dividend, paid in cash, is expected to grow regularly.
CAPITAL ALLOCATION POLICY
In line with its ambitions of responsible and sustainable growth and Net Free Cash Flow generation, Carrefour has defined a capital allocation policy including:
- Investments in business and customer offer, serving the “raison d’être”
- An ordinary dividend, fully paid in cash, and intended to grow regularly
- A bolt-on M&A strategy
- A solid investment grade rating
- Potential share buy-backs or equivalent
While continuing its investments to better serve its customers, Carrefour aims to combine a robust balance sheet, enabling it to seize acquisition opportunities, financial efficiency and shareholder return.
| ________________________ | ||
| 1 | Net Free Cash Flow corresponds to free cash flow after net finance costs and net lease payments. It includes cash-out of exceptional charges | |
| 2 | Including normalized capex between €1.5bn and €1.7bn vs. €1.2bn in 2020. See appendix for further details on assumptions | |
CARREFOUR, A COMMITTED COMPANY
Exceptional mobilization in the face of the crisis
Faced with the COVID-19 pandemic, Carrefour teams have demonstrated exceptional responsiveness to ensure the continuity of food distribution, and then meet new consumer expectations in a complex and rapidly-changing environment.
The Group immediately implemented strong measures to protect the health of employees and customers. Carrefour continues to adapt to the new sanitary provisions and rules recommended by public authorities in each country. The integrated stores and warehouses have been certified by the local health security agencies, notably in France, Spain and Brazil, attesting to the high level of protection.
Social and societal responsibility measures
In a responsible business approach, exceptional bonuses and similar benefits were paid to field staff in 2020, for a total amount of €128m.
At the same time, the Chairman and CEO, the members of the Board of Directors and of the Executive Committee waived part of their remuneration in 2020. The corresponding sums were allocated to financing solidarity actions for Group employees.
In a labor market impacted by the sanitary crisis, Carrefour is committed to youth employment and equal opportunities. The Group plans to recruit 15,000 young people in France in 2021. This represents 50% more than in 2020. Half of these recruitments will benefit young people from disadvantaged neighborhoods, in particular the priority areas known as “Quartiers de la Politique de la Ville”.
2020 CSR and food transition index at 115%
In 2020, the CSR and Food Transition index, which measures the performance of the implementation of Carrefour’s commitments, reached 115%, after 114% in 2019.
The results of the index exceeded expectations, notably for two commitments for which the Group has raised its objectives in 2020:
- Packaging reduction: -6,154 tons since 2017. Doubling of the objective to -20,000 tons by 2025, including -15,000 tons of plastic
- CO2 emissions reduction: -9% in 2020 vs 2019. New target of reduction of CO2 emissions of -30% in 2030 vs 2019 and -55% in 2040, approved by the Science Based Target initiative (SBTi)
In order to accelerate the fight against deforestation, Alexandre Bompard has assumed leadership of an international coalition of 18 manufacturers and retailers that is acting by involving all players in the supply chain.
The rate of female representation in management positions increased in 2020 (+0.4 point for senior managers, +0.5 point for managers). Carrefour also obtained in 2020 GEEIS certification, in order to promote professional equality and diversity, in all countries.
External extra-financial indices recognize the Group’s good performance: Carrefour is ranked the number one French retailer for its CSR commitments in the Dow Jones Sustainability Index (DJSI) World and in the Carbon Disclosure Project (CDP).
Measures in response to the tragic event in Porto Alegre
Diversity and inclusion are among Carrefour’s major commitments. In all countries where the Group operates, equal opportunities and a culture of respect are promoted and translated into concrete actions.
Nothing is more foreign to Carrefour’s values than the odious acts of violence that took place in Porto Alegre, where a client of a Group hypermarket, Joao Alberto Silveira Freitas, was killed on November 19, 2020 by subcontracted security guards.
Beyond supporting the family of Mr. Silveira Freitas and seeking that those responsible are brought to justice, Carrefour Brazil immediately took strong measures to prevent the repetition of such acts and to combat systemic racism. An audit was launched to thoroughly review the training policies for employees and subcontractors in terms of security and respect for diversity and the values of tolerance. This audit was followed by an action plan, defined with a fully independent External Committee for Freedom of Expression on Diversity and Inclusion, tasked with advising Carrefour Brazil in its actions against racism in its stores.
This action plan reinforces the actions already undertaken by Carrefour Brazil in the fight against racism over several years. It notably includes:
- The internalization of store security
- The inclusion in contracts of a clause to combat racism
- Awareness-raising and training actions within the company (Diversity Day, workshops on unconscious bias, guide on diversity and inclusion for suppliers) and with civil society (signature of the “Entrepreneurial Coalition for Racial and Gender Equity”, institutional partnerships and sponsorship of forums in favor of diversity)
- Promotion and recruitment goals that reflect the country’s diversity
- The creation of a fund endowed with c. BRL 40m to promote diversity and fight racism
- The donation of all the profits recorded on November 20, 2020 and Black Friday (November 26 and 27, 2020) to actions against racism
COMMERCIAL AND OPERATING PERFORMANCE BY REGION
France: Strongest growth in almost 20 years and ROI up +13.2%
In 2020, all segments grew and Carrefour experienced in H2 2020 its best half-year in terms of market share trends in 3 years1.
- 2020 sales were up +3.6% LFL, including +1.0% in hypermarkets
- Customer satisfaction improved significantly, with NPS® up +16 points in one year, including +17 points in hypermarkets and +18 points in supermarkets
- The “TOP”2 operational efficiency project has been rolled-out to date in more than 130 hypermarkets and almost 20 supermarkets. It should be rolled out across the entire store network by the end of summer 2021
Q4 2020 sales are up +5.5% LFL (+5.4% LFL in food, +5.7% LFL in non-food). This quarter, market share increased +0.1 point and Carrefour outperformed in each of the benchmark channels: hypermarkets, supermarkets, convenience and Drive1.
- In hypermarkets (+3.9% LFL in Q4), efforts made on operational excellence and customer satisfaction are bearing fruit and leading to a marked improvement in commercial dynamics
- Supermarkets (+9.8% LFL in Q4) and convenience (+5.9% LFL in Q4) confirmed their solid momentum, significantly outperforming the market
- Promocash’s activities remained particularly penalized by restaurant closures and the second lockdown
- Food e-commerce grew by +58% in Q4
Recurring operating income for 2020 was up +13.2% (+€73m) to €629m, compared to €555m in 2019. Operating margin increased by +24bps to 1.8%. This reflects the excellent dynamics of retail activities, whose profitability is up c. +€160m. ROI for France was impacted to the tune of -€90m by the drop in the contribution of financial services and the sharp slowdown in the activities of services (travel agencies, ticketing, etc.) and Promocash.
Europe (ex France): Accelerating momentum, notably in Spain and Belgium
2020 sales growth improved sharply compared to previous years, at +3.5% LFL.
- In Spain, strong NPS® growth and improving price perception underscore its continued enhanced attractiveness for consumers. Carrefour posted strong growth momentum in every quarter (+7.1% LFL in 2020)
- Carrefour returned to market share gains in 2020 in Belgium and strengthened its price positioning
In Q4 2020, LFL growth reached +1.8%.
- In Spain (+6.0% LFL), Carrefour is continuing its very good commercial momentum, in particular thanks to hypermarkets. Food e-commerce grew by +73%
- In Italy (-7.6% LFL), performance was impacted by measures linked to COVID-19, in particular the closure of shopping malls hosting hypermarkets, and marked exposure to the northern region, which was particularly affected. In an encouraging sign, customer satisfaction and price image improved in all formats
- In Belgium (+5.7% LFL), Carrefour has continued its uninterrupted market share gains since the start of the year. The Group is on the offensive and froze the prices of 20,000 products during the second lockdown
| ________________________ | ||
| 1 | Based on NielsenIQ’s RMS data for total store value sales (excluding gas) for the 156-week period ending 27/12/2020 for the French total retail market (Copyright © 2021, NielsenIQ) | |
| 2 | The “TOP” project changes the organization of tasks in the stores. It is structured around 3 teams: A Front team mainly in charge of shelving, a Scan team that ensures compliance with various management parameters (labels, expiration dates, shortage) and a Back team in charge of the organization of flows (storage management, routing of goods and equipment necessary for shelving) | |
- In Poland (-4.2% LFL), the Group was penalized by the slowdown in inflation and its high exposure to stores located in shopping centers that were closed due to the health crisis. Carrefour has also made major price investments on 1,000 products in early 2021
- In Romania (+1.6% LFL), Carrefour posted a very solid performance in a market impacted by travel restrictions, limiting the return to the country of workers abroad during the holiday season. The Group benefits in particular from its dominant position in food e-commerce
Europe’s recurring operating income rose to €698m in 2020, compared to €659m in 2019, an increase of +6.4% (+€42m) at constant exchange rates. Operating margin improved by +15bps to 3.3%. Almost all countries posted an increase in ROI. The profitability of retail activities increased by c.+€150m thanks to good commercial momentum and lower costs. ROI in Europe was impacted to the tune of -€110m by the drop in the contribution of financial services and the slowdown in sales to professionals.
Latin America: Another exceptional performance
In 2020, commercial momentum accelerated in Latin America, with LFL sales growth of +23.0%.
- In Brazil, Carrefour’s ecosystem confirmed its attractiveness. The Group posted exceptional sales growth of +18.2% LFL
- In Argentina, good commercial momentum continued with +49.3% LFL sales growth
In Q4 2020, Latin America sales were up +25.3% LFL.
- Brazil continued its exceptional momentum with sales up +24.5% at constant exchange rates, with LFL growth of +22.9%, a contribution from openings of +3.9% and a negative petrol effect of -2.2%. The currency effect was an unfavorable -36.3%
- Carrefour Retail posted its third consecutive quarter of double-digit growth, at +13.3% LFL. The high NPS® level demonstrates the strength of its positioning and highlights excellent execution. The Group continued to gain market share this quarter
- Atacadão’s sales were up +32.4% at constant exchange rates, with like-for-like growth of +27.0% and a contribution from openings of +5.5%. Carrefour reinforced its price competitiveness, notably for B2B customers. With 14 openings and the conversion of 6 Makro stores, or 20 new stores over the year, expansion momentum continues. The remaining Makro stores will be gradually converted in H1 2021
- Food e-commerce, recently enriched by a promising Atacadão platform, posted growth of +163% in the quarter
- Financial services activities have improved since June; billings grew by +19.2% in Q4
- In Argentina (+39.6% LFL), volumes increased and Carrefour gained market share
2020 recurring operating income of Latin America increased by +26.4% (+€220m) at constant exchange rates, to €786m. Operating margin increased by +25bps to 5.9%, reflecting a commercial strategy favoring volume growth.
- The sharp increase in activity in Brazil was accompanied by increased cost discipline and greater operational efficiency. The profitability of retail activities improved by c.+€280m, offsetting the drop in the contribution from financial services of c. -€90m. Brazil ROI thus reached €764m, up +22.0% (+€184m) at constant exchange rates
- Argentina’s ROI improved significantly and stood at €22m, with a €-25m impact from the application of IAS 29
Taiwan (Asia): Strengthened position
In Taiwan (Asia), 2020 sales were up +3.7% at constant exchange rates (+1.3% in Q4) and +1.2% LFL (+0.1% in Q4). Carrefour strengthened its position at the end of December with the completion of the acquisition of 224 Wellcome convenience stores.
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