By Dominique Vidalon
PARIS (Reuters) - Carrefour (PA:CARR) said on Wednesday it was confident its overhaul plan was on track after sales growth accelerated in the third quarter, reflecting improving sales in its core French and Brazilian markets.
Weakness in Spain and Italy due to competitive pressures and tough economic conditions were however a reminder that Europe's largest retailer still faced headwinds on the road to recovery.
Carrefour is in the midst of a five-year plan to cut costs and jobs, boost E-commerce investment and seek a partnership in China with Tencent (HK:0700) in a bid to boost profits and revenues and help it tackle competition from Amazon (O:AMZN).
It is reaping the benefits of price cuts, an expansion into convenience stores, and a greater focus on organic products and private-labels, having recently sealed a purchasing alliance with British rival Tesco (L:TSCO).
The company, which met all its targets under the "Carrefour 2022" plan, said it was on track to achieve cost savings of 2 billion euros by 2020 and would limit capital expenditures to an estimated 1.7-1.8 billion euros this year.
"Carrefour made great strides in the third quarter to implement its plan. We are happy with the way it is progressing and satisfied with the performance of the third quarter," Finance chief Matthieu Malige told analysts.
Asked if he was comfortable with analysts' estimates for a 2018 recurring operating profit of 1.861 billion euros, he said: "We think the full year consensus is consistent with the performance of the nine months".
Carrefour achieved a recurring operating profit of 2.006 billion in 2017.
This year's third-quarter sales came to 21.087 billion euros (£18.49 billion), roughly in line with analyst estimates of 21.1 billion euros in an Inquiry Financial poll for Reuters.
Growth reached 2.1 percent on a like-for-like basis excluding fuel and calendar effects, against 0.9 percent in the previous quarter.
FURTHER COST SAVINGS IN Q3
Carrefour's five-year plan has been well received by investors and, in July, analysts cheered the cost savings of 520 million euros achieved in the first half as a sign that execution of the plan was on track.
"On costs, we progressed in the third quarter. We continued with the momentum of the first half," said Malige without providing a figure.
Carrefour also faces pressure in France from discounting at rivals such as unlisted Leclerc. Improving the French hypermarket business is a priority for CEO Alexandre Bompard, who last month put digital chief Marie Cheval in charge of the stores.
The group said on Wednesday that sales at its French hypermarkets were flat in the third quarter following a 1 percent decline in the second quarter, although that was offset by growth in supermarkets and convenience stores.
"In France we had the best quarterly food sales growth since 2015 and growth came from all store formats," Malige said.
In Brazil, Carrefour's second-largest market after France, sales growth of 5.1 percent was boosted by a pickup in inflation for food products and the good performance of the Atacadao cash-and-carry stores.
Southern Europe was a tough spot. Sales in Italy fell 4.4 percent in slowing markets while sales in Spain fell 2.7 percent in the face of competitive pressure.
Carrefour shares have lost 13 percent of their value so far this year, underperforming their European sector (SXRP). The shares are down 29 percent since Bompard joined in July 2017.