Plassat to face French challenges at Carrefour
After a tumultuous three years at the helm of the world's second-largest grocery retailer, Carrefour chairman and CEO Lars Olofsson is set to be replaced by Georges Plassat.
The announcement follows months of speculation over Olofsson's future with the chain as it faced a rocky few years. 2011 saw a series of profit warnings, while in its French home market, the Planet hypermarket format did not gain the traction Carrefour was looking for. When the retailer launched the format in 2010 it set a target of having 500 stores by the end of 2013. At the end of last year, only 81 were open.
In France, Carrefour is also seeing domestic rivals like Auchan and Leclerc race ahead with their multi-channel offers. Elsewhere in Europe, like-for-like sales fell in 2011, with sales down in all markets during the fourth quarter. Like-for-likes rose in Latin America but were lower in Asia due to a 6% fall in China.
Plassat will join Carrefour from fashion retailer Vivarte Group, which operates some 4,500 stores. He will join Carrefour on 2 April as COO for a short transition period before being formally appointed as CEO at the next shareholders' meeting.
The company is looking to give Plassat the backing that the many factions within Carrefour were unable to give Olofsson. "Georges Plassat declared he is well aware of the magnitude of the task ahead, which will require the support of all within the company," Carrefour said in its statement yesterday (30 January).
Shareholders Group Arnault and private-equity firm Colony Capital have been lobbying for change as they pushed for better returns as the retailer's share price plunged some 45% during 2011. These same shareholders pushed out Olofsson's predecessor José Luis Durán in 2008.
Indeed, Shore Capital analyst Clive Black says the key to Plassat's success will be whether he is able to bring "stability" to the retailer, given the recent rash of executive departures at Carrefour.
"For a company of that size there has been far too much change at the top for far too long," he says, adding that Plassat needs the backing of the board and Carrefour's investors.
"Carrefour has been run like a dysfunctional football team, where the owners and the management haven't seen eye-to-eye, and that impacts the players on the ground and that's exactly what's happened at Carrefour. It's important that he represents a period of sustained stability and control of the business," emphasises Black.
Broadly, industry watchers welcomed Plassat's appointment. Conlumino analyst Neil Saunders said: "A new hand at the helm was needed as the markets, and to some degree the company, had lost faith in Lars Olofsson. This was hampering his ability to make changes as he, rather than Carrefour, was becoming the story."
Where Olofsson's prior experience lay in FMCG as a Nestle executive, Plassat's retail experience will hold him in good stead. "Georges Plassat brings with him great retail experience but also great knowledge of Carrefour. His turnaround experience gained from his time at Vivarte will be invaluable," says Saunders.
This turnaround experience is a particular positive for Plassat. Kantar director of retail insights Bryan Roberts said: "Importantly, he is also familiar with dealing with private equity owners, a vital qualification for the Carrefour gig."
While Plassat's most recent experience has been in apparel retail, the company's non-food offer is a "secondary issue" in the current economic climate says Roberts. While he says that general merchandise is not a "massive trip driver for hypermarkets", there are some GM categories that could be improved. "Fashion is a bit weak and could do with a better brand than Tex. Carrefour could definitely learn a thing or two from Tesco and Wal-Mart when it comes to clothing."
Once in the role, Plassat's key priority will be to reinvent the company's French hypermarket offer - something Olofsson attempted to do with his Carrefour Planet model.
The Carrefour Planet hypermarket format was launched in September 2010, the centrepiece of its of its bid to turn around sales in its ailing hypermarkets. However, after the roll out of the format stalled earlier this month, the retailer revealed that it was reviewing the future of the much-vaunted format.
Industry reaction to the format has not been positive, with Roberts saying that "when price perception is the key problem, Carrefour Planet is a wildly inappropriate strategy".
Meanwhile Saunders, argues Planet is an "expensive way of addressing the issue of an outdated format". While Saunders concedes that there is some "good thinking" behind Planet, he says the concept as a whole is "yesterday's solution" which does not incorporate multi-channel, click-and-collect or a whole host of other factors that are important to customers.
Saunders says that a key priority for the retailer will be to develop more of a multi-channel presence and create greater convenience for the customer. "To date, the Carrefour customer model has been 'come to us', it now needs to become 'we come to you'," says Saunders.
It also needs to recognise the deterioration in consumer finances across some of Carrefour's markets and a plan to address this.
Indeed, Roberts says that key to fixing French essentially means "fixing Carrefour's tarnished reputation for value for money". Olofsson attempted to make overtures towards this with with the launch of the Carrefour Discount range in 2009, a move which, at the time Carrefour hoped would help to restore its "deformed" pricing image.
Internationally, Black asks how committed Carrefour is to some of its markets - particularly Poland, Turkey and some of the South East Asian countries where its market position is "weak and not performing well".
However, Roberts argues that there is "no real sign of them actively wanting to exit markets", aside from Greece, which sounds like a "general horror show".
As Plassat takes the reins of the world's second-largest retailer, he will face many of the same issues that Olofsson attempted to solve in his time with Carrefour. Hopefully his retail background will garner him the support he needs to bring stability to the retailer and as Roberts hopes, he will be allowed to take a "longer term view for Carrefour and lay down some strategies that have a broader remit than generating cash".
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