September 4, 2017 / 3:36 PM / in 9 months

Auchan pays price for French price war as H1 sales disappoint

* French hypermarkets seen improving in H2 2018 - CEO

* Carrefour warned on profits amid tough competition

By Dominique Vidalon

PARIS, Sept 4 (Reuters) - France’s Auchan said its retail arm did worse than expected in the first half of the year, with revenues rising 2.1 percent - or just 0.1 percent at constant exchange rates - weighed down by a weak performance in its home market.

Auchan Retail, whose hypermarkets are caught up in a price war with Carrefour and others in France, reported 25.9 billion euros ($30.81 billion) in sales during the period.

“The first-half results of Auchan Retail lag our expectations. They are mainly impacted by France, Italy, and Russia ... More than ever the transformation of Auchan Retail is the priority,” the unit’s CEO, Wilhelm Hubner, said.

In France alone, the source of a third of its retail business, revenue fell 1.8 percent to 8.522 billion euros, dragged down by falling sales in the highly competitive hypermarket arena.

Auchan also competes with Casino, unlisted Leclerc and other retailers in France.

European leader Carrefour on Wednesday reported weaker-than-expected first-half earnings as intense retail competition weighed on its margins and it warned profits could slump 12 percent in the full year.

Hubner told a conference call Auchan’s French hypermarket performance would improve in the second half of 2018, when the benefits of a three-year revamp plan would kick in.

Auchan Retail said it March it would spend 1.3 billion euros to unify its stores under a single banner in France, renovate shops and accelerate online expansion.

Hubner said Auchan Retail had been less aggressive in France commercially, notably on promotions, in the first half, as it was focused on executing the transformation plan.

At Auchan Holding, which also includes the Immochan property business and the Oney banking business, cost cuts drove operating profit up 4.3 percent to 326 million euros in the first half.

Total revenue at Auchan Holding grew 2.1 to 26.5 billion euros, thanks to good demand in eastern Europe, notably Ukraine, and in China, the group said.

($1 = 0.8407 euros)

Reporting by Dominique Vidalon; Editing by Andrew Heavens

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