October 18, 2017 / 4:50 PM / 5 months ago

UPDATE 2-Carrefour's slowing growth ups challenge for new CEO

* Q3 sales 21.86 bln euros, up 0.5 pct like-for-like

* Q3 French sales down 0.9 pct, hypers and supers negative

* Keeps 2017 goals, turnaround plan expected by year end (Adds context, Kantar data, analysts comments)

By Dominique Vidalon

PARIS, Oct 18 (Reuters) - Carrefour’s sales growth slowed sharply in the third quarter on weakening demand in its core French market, the world’s second-largest retailer said on Wednesday, highlighting the challenge facing its new boss.

Improving the French hypermarket business is a priority for CEO Alexandre Bompard, who joined in July. That goal has eluded several of his predecessors in the face of stiff competition and discounting from online competitors and unlisted rival Leclerc.

Carrefour’s third-quarter sales came to 21.86 billion euros ($25.73 billion), broadly in line with analyst estimates. Growth slowed to 0.5 percent on a like-for-like basis excluding fuel and calendar effects, from 2.8 percent in the previous quarter.

In France, where Carrefour makes 47 percent of its sales, like-for-like revenue fell 0.9 percent following 1.9 percent growth in the second quarter, with both hypermarket and supermarket sales turning negative.

Bompard is also under pressure to expand in e-commerce. Amazon’s $13.7 billion bid for Whole Foods Market has sent reverberations across the sector, fueling speculation that the U.S. tech giant may also be weighing deals in France or other European countries.

The weaker numbers for Carrefour reflected a competitive climate in France as well as softer fruit and vegetable prices and adverse weather conditions, the company said.

“Bompard essentially needs to replicate the feat of Dave Lewis at Tesco, that is lower prices, grow sales and rebuild margins. We believe rebuilding Carrefour’s competitive position should be the priority for the new CEO,” HSBC analysts said in a recent note.

Bernstein analysts said industry data showed Carrefour lost market share in the French food retail market in the four weeks to Oct. 1 and that at 20.7 percent, it was now lagging Leclerc by 80 basis points. They added the hypermarket business was responsible for a 0.8 percent drop in Carrefour’s market share.

“This is driven by consumers switching to Leclerc for their stronger online proposition and increased promotions,” Bernstein analyst Bruno Monteyne said.

In Brazil, Carrefour’s second-largest market after France, the economic climate was improving but sales were hurt by food deflation. Carrefour listed its Brazil business in July.

Carrefour warned in August its operating profit could fall by around 12 percent this year, cutting its sales growth target to 2-4 percent at constant exchange rates. The company, which has pledged a turnaround plan by the end of the year, reiterated its existing financial goals on Wednesday.

A union official said last month Carrefour’s options included closing some French hypermarkets, turning some into franchises or introducing Sunday opening for others.

$1 = 0.8495 euros Reporting by Dominique Vidalon; Editing by Laurence Frost and Mark Potter

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