Carrefour

Company Update:
Carrefour’s Q3 FY26 trading was slightly ahead of market expectations, but the company lowered its FY26 guidance.

Group lfl sales grew 2.3% yoy (+20bp vs consensus), driven by food (+2.7%), while non-food remained weak (-1.1%). Gross sales of €22.7bn were in line with consensus. 

The beat came from Other countries (+8.4%; +200bp vs consensus), led by Argentina (+24.2%; +370bp) and Belgium (+2.3%; +130bp). Among the key operating regions, France was broadly in line (+1.2%; -10bp vs consensus), while Spain (+2.1%; -40bp) and Brazil (+1.4%; -60bp) fell short.

Other takeaways:

• France: Hypers remained the weak spot (+0.6%; -25bp vs consensus), while supers (+1.2%) and convenience (+2.8%) beat expectations. Excluding Cora & Match (C&M), legacy hypers declined 0.6%, while former Cora stores grew 7.3%.

• Brazil: Trading improved sequentially from +0.4% in Q2, led by Atacadão (+2.0% lfl) and further market share gains. Cash & carry volumes remained weak.

• FY26 guidance cut: Following riots, looting and curfews in France, Carrefour now expects 0-15bp operating margin expansion (vs +25bp), stable to slightly higher adjusted EPS (vs high-single-digit growth) and a slight decline in net FCF (vs slight growth). Capex has been reduced to €1.6bn from €1.7bn.

• Estimated cost of disruption: The CFO estimates an €80-200m operating income hit, equivalent to 3-9% of FY26 consensus ROI (€2.33bn). Around 50 stores were affected on the first day, many looted, with direct costs running to several tens of millions of euros. Precautionary closures and higher security spending add to the burden. Carrefour is particularly exposed given its extensive convenience network in cities such as Paris, Lyon and Marseille.

Our view: The Q3 headline beat was driven by Argentina and Belgium rather than Carrefour’s core markets. The unrest adds a material near-term earnings risk, but our concern goes beyond the immediate disruption. French trading had already weakened before the riots, and the legacy hypermarket estate remains under pressure despite continued price investment.

We will lower our FY26 and FY27 estimates and cut our target price by mid- to high-single digits. We maintain a cautious stance on the stock.

Expert Opinion:
This is a negative for Carrefour, obviously, and also a negative for food retailers as the consumption trend seems to weaken. Yet, the X-read is probably more negative for other consumption-related businesses, notably those with a strong exposure to France. As a reminder, food retail is by nature more resilient than discretionary consumption segments when consumption suffers. 

Stocks like Mercialys, Klepierre or Unibail could be under pressure even though Klepierre also posted surprisingly resilient results this morning (but it is way more defensive than Unibail or Mercialys). Icade also posted weak numbers and prospects in residential developments.  

 

Carrefour had a decent run but it remains cheap and still trades at a sharp discount to European peers. We expect some profit-taking over the next few weeks, but the company will have an investor day on November 17 to focus on the Hypermarket strategy in France. Beyond the (hopefully temporary) riot issues in France, a convincing strategy for hypers would be key for the rerating of the stock. One to keep on your radars. 


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