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Banking

Breaking views: Carrefour hits price-cut glitch

By Camilla Palladino

www.breakingviews.com

It's a stark contrast. Tesco, the biggest UK supermarket group, is roaring ahead; its French peer, Carrefour, seems to have hit yet another glitch.

When Carrefour last reported results at the start of September, it said it had cut prices without slicing into margins, and pointed to a small uplift in French market share. So Investors were optimistic about the effect a second set of price cuts, planned for the second half, would have. But Carrefour's strategy has been thrown into doubt by a report that in July and August its hypermarkets lost share in food, and by a profit warning from Guyenne et Gascogne, which has a joint venture in hypermarkets with Carrefour.

This might not be quite as bad as it looks. After all, August was a dismal month for sales of fresh produce in France. This would have benefited the hard discounters – Carrefour's arch-enemies – as they tend not to sell fresh food. The overall figure for French market share will be mitigated by supermarkets, where Carrefour gained market share. Moreover, Guyenne et Gascogne is a much smaller operator than Carrefour, with a different cost structure.

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