PARIS – French retailer Carrefour SA said its home market was showing signs of improvement, reassuring investors that an action plan being implemented by new Chief Executive Georges Plassat is starting to bear fruit.
Plassat joined Carrefour in May with a brief to reverse years of underperformance in Carrefour's main European markets, where the hypermarkets in which it had heavily invested have been hit by competition from specialist stores and trends toward local and online shopping.
Shares in the world's second-largest retailer after U.S. group Wal-Mart Stores Inc were up 4.4 percent at 16.70 euros by 0858 GMT (0458 EDT), the top riser on the CAC 40 index of French blue-chip stocks .
"After a positive surprise in the first half and another ... in the third quarter, confidence could quietly return in the new management's ability to put things back on track," analysts at brokerage Aurel BGC said in a note.
Plassat, who has a record of company restructuring and whose reputation as a cost-cutter earned him the nickname of "Le Nettoyeur" (cleaner), took over from retiring Lars Olofsson and is trying to around the company's fortunes.
He said in August he would slash costs and defend key markets like France, Brazil and China, but has so far provided little detail on his turnaround plan.
Carrefour's third-quarter statement showed sales up 0.2 percent on a like-for-like basis at 22.63 billion euros ($29.2 billion), above an average forecast of 22.57 billion in a Reuters poll of seven banks and brokerages, as robust demand in Latin America made up for weakness in austerity-hit Spain and Italy.
Revenue in France stripping out fuel declined 1.5 percent, an improvement from a 3.3 percent drop in the second quarter and indicating initiatives such as offering cash-strapped shoppers lasting price cuts, introduced last year and strengthened by Plassat, are starting to have an impact.
France accounts for more than 40 percent of group sales.
"While we are pleased with these encouraging signs, we are still hard at work in France," Chief Financial Officer Pierre-Jean Sivignon told a conference call.
The group said it was comfortable with analyst estimates for 2012 earnings of between 2.07 and 2.10 billion euros, before interest and taxes (EBIT), against 2.18 billion last year.
Sales at Carrefour's French hypermarkets fell 3.3 percent in the third quarter, against a 5.7 percent fall in the second quarter. Sales in the food sector improved for a third consecutive quarter.
Sivignon told analysts the sales trend for non-food items such as textiles and electronics had also marginally improved but remained difficult in French hypermarkets.
He said "price image", a closely watched perception shoppers have of how expensive Carrefour is compared with rivals, was also gradually improving. "It's a long-term effort but the trend is there," he said.
Many retailers across Europe are struggling as consumers' disposable incomes have been squeezed by rising prices, muted wage growth and government austerity measures, as well as changing consumer habits.
Last week Metro AG , the world's fourth-largest retailer, cut its earnings outlook for 2012, blaming rising unemployment in the euro zone and the sovereign debt crisis, while Britain's biggest retailer Tesco Plc recently reported a 12.4 percent drop in UK trading profit.
Carrefour still has big operations in some of the countries worst hit by the crisis, such as Spain and Italy, having pulled out of Greece. Spain and Italy accounted for more than 16 percent of group sales in the third quarter.
Quarterly like-for-like sales excluding petrol fell 5.4 percent in Spain and 6.6 percent in Italy.
The trend for non-food sales in Spain was slightly better, but Sivignon cautioned that a new batch of austerity measures there could have an impact on fourth-quarter consumption.
In emerging markets, China continued to struggle, while Brazil, Carrefour's second-largest market after France, had like-for-like sales growth of 9.7 percent.
(Editing by James Regan and David Holmes)