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Brick And Mortar Can Hurt Too

31 August 2017 by lberuti

CAFP ( CArrefour ) surprised the market today with a profit warning. Its shares plunged more than 13% and its 5-year risk premium increased 9bps to 64bps after the company said that full year operating profit will decline a similar amount as the 12% drop in the first half. Alexandre Bompard, CAFP’s new CEO, has been recruited partly for his ability to see off the likes of Amazon, after he gained a reputation for his digital expertise when he successfully steered Fnac Darty into e-commerce. While CAFP was hit by difficulties in Argentina, it mostly had to face a step-up in competition on its home turf, as Leclerc, the low-price supermarket chain, overtook CAFP as France’s biggest grocer by market share. Leclerc recently grew more aggressive in its promotions, and CAFP had to beef up its own price cuts, one of the main factors behind its warning that the second part of the year will be as tough as the first. If on-line retailers are certainly a threat, brick and mortar competitors can cause pain too.