International analysis: Home and away different worlds for French grocers

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Two of France’s largest retailers, Carrefour and Casino, reported first-quarter trading figures on the same day.

Carrefour and Casino have been locked in a fierce price battle in France

There were common themes - continued rampant growth internationally (especially in Latin America), but a painful price war at home.

In terms of the headline number, Casino’s international division most readily caught the eye, reporting an 8.3% rise in “organic” growth (at constant exchange rates) to E7.4bn (£6.3bn).

Not surprisingly, the business is keen to continue investing heavily in high-growth channels in both Latin America and Asia, notably in its Assai cash and carry operation in Brazil (with the expansion rate upped to 12 openings a year) and the convenience store business in Thailand (with a target of 500 outlets by 2018).

Overseas growth was slightly more muted at larger rival Carrefour over the same period.

International organic sales (excluding fuel) rose 3.6% to E11.5bn (£9.83bn), or 1.3% on a like-for-like basis. This belied significant contrasts between individual markets. Boosted by the acquisition of the EKI supermarket chain last summer, sales in Argentina rose 23%, while like-for-likes were up 10.6% in Brazil. But Carrefour reported a 2.2% like-for-like fall in China. Although an improving trend, the grocer has much to put in order before it can justify its stated ambition of opening 20 new stores there per year there.

However, overseas growth could not mask ongoing pain at both retailers’ domestic operations, as the price war in France intensifies.

Saddled with consumer notions of being the most expensive mainstream operators, neither could afford to ignore the aggressive stance of rivals Leclerc and Auchan, which have both invested heavily in price.

But the pain of making the transition was very apparent in the first-quarter figures. Carrefour’s organic sales in France dipped 0.3% to E9.3bn (£7.95bn), with particularly weak like-for-likes (-2.6%) at the core hypermarket division. Although less reliant on the domestic market than its rival, Casino’s French sales shrunk by 3.4% to E4.3bn (£3.67bn).

Continued investment in price domestically is a necessary evil for both. But the risk is that the price cuts do not filter through to increased volumes in the longer term, as unilateral price cuts across the industry effectively result in a margin-damaging zero sum gain. In this event, rivals Leclerc and Auchan would be seen as the ultimate victors.