Carrefour S

Carrefour S-A.

Carrefour S-A.

Source: Case Studies in Finance 5 Source: Case Studies in Finance 5thth

 edition Tata Mc

 edition Tata Mc Graw-Hill EditionGraw-Hill Edition

In the summer of 2002, with total sales of (euro) EUR53. !illion from more than In the summer of 2002, with total sales of (euro) EUR53. !illion from more than 5,200 stores, Carrefour S.A. was Euro"e#s lar$est retailer. %&er the "ast four 'ears, 5,200 stores, Carrefour S.A. was Euro"e#s lar$est retailer. %&er the "ast four 'ears, Carrefour#s $rowth ha ourre almost entirel' outsie *rane an inlue se&eral Carrefour#s $rowth ha ourre almost entirel' outsie *rane an inlue se&eral lar$e a+uisitions. In the "ast, Carrefour mana$ement ha $enerall' finane lar$e a+uisitions. In the "ast, Carrefour mana$ement ha $enerall' finane om"an'-$row

$rowth th throthrou$h u$h seuseuritirities es enenominominate ate in in the the urrurren' en' of of !us!usinesiness s o"eo"eratirations. ons. ItsIts in&estment !ans, or$an Stanle' an US /ar!ur$, howe&er, ha reentl' su$$este in&estment !ans, or$an Stanle' an US /ar!ur$, howe&er, ha reentl' su$$este that Carrefour onsier !orrowin$ in ritish "ouns sterlin$ in orer to tae a&anta$e that Carrefour onsier !orrowin$ in ritish "ouns sterlin$ in orer to tae a&anta$e of

of a a !o!orrorrowiwin$ n$ o"o""o"orturtunitnit' ' in in ththat at uurrerren'n'. . /it/ith h a a e!e!t-ft-finainannin$ in$ rere+u+uireiremenment t of of  EUR50 million, the !on issue woul !e one of Carrefour#s lar$est. 1ow, in Au$ust EUR50 million, the !on issue woul !e one of Carrefour#s lar$est. 1ow, in Au$ust 2002, the in&estment !aners e"ete that the 0-'ear Carrefour !ons woul !e 2002, the in&estment !aners e"ete that the 0-'ear Carrefour !ons woul !e "rie at a ou"on rate of 5.25 in

"rie at a ou"on rate of 5.25 in euros, 5.35 in ritish "ouneuros, 5.35 in ritish "ouns, 3.425 in Swiss frans,s, 3.425 in Swiss frans, or 5.5 in U.S. ollars.

or 5.5 in U.S. ollars. Carrefour S.A. Carrefour S.A.

In 43, Carrefour altere the worl of retailin$ with the introution of the In 43, Carrefour altere the worl of retailin$ with the introution of the h'"er-maret one"t in the small *renh town of Sainte-6ene&ie&e-es-ois, southeast of  maret one"t in the small *renh town of Sainte-6ene&ie&e-es-ois, southeast of  7aris. 8his format om!ine a su"ermaret, ru$store, isount store, an $as station 7aris. 8his format om!ine a su"ermaret, ru$store, isount store, an $as station into one massi&e, one-sto"-sho""in$ me$astore. 8he ori$inal store ha 2,500 s+uare into one massi&e, one-sto"-sho""in$ me$astore. 8he ori$inal store ha 2,500 s+uare meters of retail s"ae, 2 heouts, an 900 "arin$ s"aes. 8he om"an' e"ane meters of retail s"ae, 2 heouts, an 900 "arin$ s"aes. 8he om"an' e"ane ra"il' in *rane an !e'on, o"enin$ its first store outsie *rane (el$ium) in 4, ra"il' in *rane an !e'on, o"enin$ its first store outsie *rane (el$ium) in 4, an outsie Euro"e (ra:il) in 5. In aition to stron$ or$ani $rowth, Carrefour  an outsie Euro"e (ra:il) in 5. In aition to stron$ or$ani $rowth, Carrefour  "u

"ursursue e seseleleti&ti&e e aa+u+uisisitiitionsons, , ininluluinin$ $ notnota!a!le le mermer$e$ers rs wiwith th EuEuroromarmarhhe e anan on

ontlautlaur r in , an 7romoin , an 7romoes in es in .. Exhibit 1Exhibit 1 "ro&ies a histor' of Carrefour#s"ro&ies a histor' of Carrefour#s store "ortfolio from 2 to 200.

store "ortfolio from 2 to 200.

Carrefour was "rofita!le in all ma;or o"eratin$ re$ions. In 200, the om"an' Carrefour was "rofita!le in all ma;or o"eratin$ re$ions. In 200, the om"an' $en-erate o"eratin$ "rofits of EUR2.< !illion on total net sales of EUR4.5 !illion. %f= that erate o"eratin$ "rofits of EUR2.< !illion on total net sales of EUR4.5 !illion. %f= that "rofit, 5 "erent ori$inate in Asia, 2 "erent ori$inate in >atin Ameria, an? 24 "rofit, 5 "erent ori$inate in Asia, 2 "erent ori$inate in >atin Ameria, an? 24 "erent ori$inate in Euro"e outsie *rane with the remainer of "rofits omin$ from "erent ori$inate in Euro"e outsie *rane with the remainer of "rofits omin$ from *renh o"erations 8he re$ional sales !reaown was  "erent from Asia, 2 "erent *renh o"erations 8he re$ional sales !reaown was  "erent from Asia, 2 "erent from >atin Ameria, an 32 "erent from. Euro"e outsie *rane. *or Carrefour, 200 from >atin Ameria, an 32 "erent from. Euro"e outsie *rane. *or Carrefour, 200 was the

was the firsfirst t 'ea'ear r thathat t totatotal l salesales s outsoutsie *rane eeeie *rane eeee e totatotal l omeomesti salessti sales Carrefo

Carrefour was the lar$est retailer in ur was the lar$est retailer in *rane. el$iu*rane. el$ium, 6reee, an S"ainm, 6reee, an S"ain ExhExhibiibitt 22 etails Carrefour#s onsoliate finanial statements

etails Carrefour#s onsoliate finanial statements 8he

8he om"om"an' an' e"e"eteete  to to maintmaintain ain its its e"e"ansansion ion tra;tra;etoetor'r'. . CarrCarrefoefour#s ur#s CE%CE%,, @aniel ernar, state his e"etation that, in 2002, the om"an' woul inrease @aniel ernar, state his e"etation that, in 2002, the om"an' woul inrease sales !' 5 "erent on onstant ehan$e rates an inrease reurrin$ net inome !' sales !' 5 "erent on onstant ehan$e rates an inrease reurrin$ net inome !'

0 5 "erent. e asserte that the om"an' ontinue to $ain maret share in most of the ountries where it o"erate, nota!l' in Ital', el$ium, ra:il, an Ar$entina. Carrefour re-launhe its e"ansion in China, with the o"enin$ of a store in Chen$u in Bune.

Carrefour's Financin !olic"

#n eah ountr', Carrefour o"erate "rimaril' within the loal eonom' when !u'in$ an sellin$ "routs. *orei$n-urren' e"osure on im"orte $oos was $enerall' he$e throu$h urren'-forwar ontrats.

In 200, total Carrefour !orrowin$s were EUR%.5 !illion, of whih EUR4.9 !illion were in "u!lil' trae !ons. Carrefour#s e!t was enominate in man' urrenies. Exhibit $ etails the reent om"osition of Carrefour#s !orrowin$s !' urren'. *orei$n-urren' !orrowin$ was $enerall' he$e so that total e!t re+uirements were urrentl'  "erent in euros.

Current aret %""ortunities

 As Carrefour mana$ement onsiere the !on-enomination eision, it also on-siere the urrent inflation, interest-rate, an ehan$e-rate en&ironment. 2 _{%&er the}

"ast three 'ears, lon$-term !on 'iels ha eline in all four urrenies. 8he Swiss fran#s interest rate, howe&er, ha onsistentl' !een the lowest rate. 8he eision also hin$e on future mo&ements in ehan$e rates. %&er the "ast fi&e 'ears, the euro ha e"reiate a$ainst most ma;or urrenies. Shoul this tren ontinue, "a'in$ own forei$n-urren' e!t with euro-enominate ash flow woul !eome inreasin$l' e"ensi&e. Exhibits %& 5& an  "ro&ie information on trens in inflation, $o&ernment-!enhmar !on 'iels, an ehan$e rates in the &arious urrenies. Exhibits ( an ) "ro&ie information on "re&ailin$ urrent s"ot ehan$e rates an the 'iel ur&e.

_{Carrefour S.A . news release, 3 Bune 2002}

2 _{eause the !ons woul !e offere in the euro!on maret, the' woul !e su!;et}

to similar issuane osts, li+uiit', an s"eifiations re$arless of the urren' enomination. Euro!ons uniforml' followe an annual ou"on on&ention?

EDII8   8otal 1um!er of Consoliate Stores 2 3 9 5 4  <  2000 200 *rane S"ain 7ortu$al Ital' 8ure' 7olan C:eh Re"u!li Slo&aia el$ium Swit:erlan 6reee  Ar$entina ra:il eio Chile Colom!ia Unite States 8aiwan ala'sia China Forea Inonesia Sin$a"ore on$ Fon$ 8hailan Ba"an 8otal 9<5 90 2 0 0 4 2< 2 5 54< 594 93 2    2  434 <2< 50 2 5   33 2 <  34 <90 50 2 5  2 3<  0  2 4< 4 53 2 4  5 99 3 3 2 3 3  2  <05 54 3 4 2  < 9   3  3  2 4 4 254 5< 9 4 2 3 2 5    2 5 9 4   9  9< 03 <5< 2< 52 9 3 3 94 2< 52  2 2 23 4 20 2 5  9  999< 24 3 2 93 94 23 4 2 323 34 < < 3 3 29 4 29 20     5923 25 52 2< 305  40  2 2 < 33< 900 222  9 5 24 4 29 22 <  5 3 5233 SoureG Carrefour S.A., Annual Re"ort, 200.

EDII8 2  *inanial Statements (in millions of euros)

200 2000

Sales, net of taes 4,9<4 49,<02

Cost of sales 53,<5 9,20

Sales, $eneral, H amin, e". ,2 ,234

%ther inome 495 43

@e"reiation ,02 ,4<5

EI8 2,<24 2,25

Interest e"ense 494 0

Inome ta 5<4 450

1et inome from reurrin$ o"erations

,59 ,34

*ieassets 24,54 2,<90

In&entories 5,0 5,4

8rae an su""lier reei&a!les 2,94 3,94

%ther reei&a!les 3,25< 9,3<

Cash an mareta!le seurities 9, 2,9

8otal assets 93,90 99,03

Shareholers# e+uit' <,2 <,32

7ro&ision for lon$-term lia!ilities 2,02 ,2

orrowin$s 3,9 3,9

8rae "a'a!les an other e!t ,< ,3

8otal lia!ilities an shareholers# e+uit'