Cost-cutting begins to bear fruit at Carrefour

PARIS (AP) French big box store Carrefour posted a significant improvement in profit in the first half of the year, hailing it as a sign that its turnaround plan is beginning to bear fruit.

Europe's largest retailer by sales said Thursday that its net income rose to 902 million euros ($1.2 billion), compared to a loss of 31 million euros the same time last year.

But much of that boost about 380 million euros was from operations the company is discontinuing, raising questions about whether the company can stay profitable.

Still, investors were cheered as the results far out-stripped the consensus estimate of 250 million euros in profit. Shares shot up 4.2 percent in early trading on the Paris bourse.

The company said that excluding asset sales and other elements not counted in this year's reporting, its net profit last year would have been 3 million euros.

Earlier in the summer, Carrefour reported that its revenue was 41 billion euros for the first half of this year, compared to 43.7 billion euros in 2012.

The retail group has been struggling for years, even before the European debt crisis decimated its biggest markets, and has seen a dizzying string of management changes. Georges Plassat took over as chief executive about a year ago, pledging to cut costs and staff and to refocus the company on markets where it thought it could be a leader.

It has closed stores or transferred operations to partners in Singapore, Malaysia, Colombia and Greece. It has also launched a major effort to win back customers to its stores in France by a campaign to convince customers it offers the best prices in a competitive market.

Those efforts, particularly the cost cuts, appear to be beginning to bear fruit. The company cut its debt by about a third, and operating profit in Carrefour's home market rose 75 percent in the first half of the year.

It, however, fell about the same rate in the rest of Europe. CFO Pierre-Jean Sivignon blamed the drop on poor management in Italy, where the team has been replaced, and the continuing recession in Spain.

Despite the poor showing in Europe, Plassat said that Carrefour would never give up on the region and that he was confident it could return to growth and profitability there.

"There might be a temptation to give up all hope on Europe ... and yet the average per capita income is higher in Europe than anywhere else. This is a prosperous region," Plassat told analysts on a call Thursday. "I believe that we should still believe in Europe, and it is essential for Carrefour to have strong positions in this part of the world."