CARREFOUR

FINANCIAL ANALYSIS

Would we invest in Carrefour in 2024?

Presented by Jeanne Lacoste, Elias Kramdi, Benjamin Amstutz, Felix Coudouy, Khalid Abdel Atif
Financial Analysis Report; CHAFTAR Jamil

Table of Contents

I. Presentation of the company ......................................................................................................... 3

II. Income Statement Analysis ............................................................................................................ 3
o Analysis of Carrefour.................................................................................................................................. 3
o Analysis of Casino ...................................................................................................................................... 5
III. Balance Sheet Analysis............................................................................................................... 7
IV. Cashflow Analysis 2021-2023 .................................................................................................. 10
V. Conclusion and recommendations of Carrefour’s Financial Analysis .................................... 12

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Financial Analysis Report; CHAFTAR Jamil

I. Presentation of the company

Carrefour is a French mass retailer created in 1959 and founded by Marcel Fournier. It is the
European leader in the sector and the world's second-largest group behind the American Wal-Mart.

The Group generates 43% of its sales in France, 36% in the rest of Europe and 21% in the rest of
the world.

Carrefour extends to around 40 countries and has more than 14 000 points of sales and is composed
of 300 000 collaborators.

II. Income Statement Analysis

o Analysis of Carrefour
Here is a complete analysis of the financial data, incorporating percentage changes, numerical
values, and macroeconomic explanations.

1. Operating Revenue (Turnover)

Analysis: The operating revenue increased by €5.15M, reflecting higher sales or improved market
penetration. However, this growth did not improve profitability due to cost pressures.
Inflation: The revenue growth may partially be explained by inflation, leading to higher product
prices.
Post-COVID recovery: The easing of restrictions globally might have resulted in increased
consumer spending or activity in specific sectors.

2. Costs of Goods Sold (COGS)

Analysis: COGS increased in proportion to revenue, suggesting the company struggled to manage
cost increases. This led to no improvement in the gross margin.
Raw Material Costs: Global supply chain challenges and elevated raw material prices could have
driven up input costs.
Energy Costs: Particularly in Europe, 2023 saw heightened energy prices that would affect
production and logistics expenses.

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3. Gross Margin
Analysis: The gross margin remained stable at 18.56% (a negligible decline of 0.01pp). This
indicates the company managed to pass rising costs onto customers but without improving
operational efficiency.
Macroeconomic Context: The competitive market environment likely limited the company’s
ability to raise prices further, which kept gross margins unchanged.

4. Operating Profit (EBIT)

Analysis: The EBIT margin dropped sharply due to an increase in Other Operating Expenses,
which rose by €1,507,498 (+9.9%) from €15,200,109 (2022) to €16,707,607 (2023). This
highlights inefficiencies in controlling indirect costs.
Energy crisis: Rising energy costs in Europe could explain the increase in operating expenses.
Labor market pressure: Tight labor markets in 2023 likely led to increased wage costs, putting
pressure on operating profitability.

5. Profit Before Tax (PBT)

Analysis: The drop in PBT reflects the company’s inability to maintain operating efficiency.
However, the improvement in financial expenses (-€176,835, or -16.0%) from €1,103,930 (2022)
to €927,095 (2023) slightly mitigated the decline.
Interest rates: While borrowing costs rose globally in 2023, the company managed its financial
expenses effectively.
Weaker operational results were still the primary driver of the PBT decline.

6. Net Income (Profit for the Period)

Analysis: Despite the decline in PBT, net income rose by €395,420 due to extraordinary revenues
of €838,695 in 2023, compared to an extraordinary expense of -€231,452 in 2022. This one-off
gain likely came from asset sales, legal settlements, or other non-recurring items.
Macroeconomic Context: Companies in 2023 often turned to non-recurring gains like asset
disposals or subsidies to offset poor operational results amid tough economic conditions.

Key Macroeconomic Drivers Behind the Results:

Inflation: Global inflation in 2023 increased input costs (materials, wages, logistics), eroding profit
margins despite higher revenues.
Energy Crisis: Particularly in Europe, the energy crisis caused operating expenses to spike.

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Interest Rates: Central banks raised rates to combat inflation, increasing borrowing costs for many
companies, although this company managed financial expenses relatively well.
Labor Market Pressures: Post-pandemic labor shortages led to higher wages, adding to operating
expenses.
Extraordinary Revenues: The reliance on €838,695 in non-operational gains in 2023 indicates
external pressures on core profitability, as many companies sought to liquidate assets or access
subsidies during economic uncertainty.

Conclusion and Recommendations

Performance Summary: Revenue growth (+5.9%) is a positive sign, but profitability metrics like
EBIT (-57.4%) and profit margin (-33.9%) reveal cost management issues.
The reliance on extraordinary revenues (+€838,695 in 2023) highlights underlying operational
inefficiencies.
Improve Cost Efficiency: Focus on controlling operating expenses, particularly administrative and
energy-related costs.
Diversify Revenue Streams: Expand into new markets or products to reduce dependency on non-
operational gains.
Optimize Pricing: Leverage pricing strategies to reflect rising costs without losing competitiveness.
Debt and Cash Flow Management: Continue improving financial expenses and generate consistent
cash flow for sustainability.

Income statement ratio for Carrefour

o Analysis of Casino

1. Operating Revenue (Turnover)

Casino's operating revenue decreased by €6,793,345 (-18.6%) from €36,497,968 in 2022 to
€29,704,623 in 2023. This significant decline reflects weakened sales performance or market share
loss. Unlike in the previous case of revenue growth, this contraction may indicate a challenging
retail environment, reduced customer spending, or increased competition.
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2. Costs of Goods Sold (COGS)

COGS decreased by €2,591,233 (-34.6%) from €7,488,595 in 2022 to €4,897,362 in 2023. This
substantial drop suggests significant cost-cutting measures or a reduced scale of operations. The
reduction in COGS relative to the revenue decline indicates potential improvements in operational
efficiency or procurement strategies.

3. Gross Profit Margin

The gross profit margin improved to 83.5% in 2023, up from 79.5% in 2022—a gain of 4
percentage points. This improvement reflects effective cost management despite declining
revenues. It indicates that Casino succeeded in optimizing its product mix or reducing production-
related expenses.

4. Operating Profit (EBIT)

EBIT decreased drastically, from a positive €326,380 in 2022 to a loss of €-2,784,601 in 2023.
This represents a massive decline of €-3,110,981 (-953%). The steep fall points to increased
operating expenses or reduced operational efficiency, potentially driven by higher labor, energy,
or administrative costs. This sharp decline suggests significant internal inefficiencies or structural
challenges.

5. Profit Before Tax (PBT)

PBT fell from €-385,040 in 2022 to €-7,105,153 in 2023, representing a decline of €-6,720,113 (-
1,743%). This enormous drop indicates severe financial strain, driven by operational losses and
potentially exacerbated by financial costs. The scale of the decline highlights challenges in
managing debt or other financial obligations.

6. Net Income
Net income decreased from €-337,050 in 2022 to €-6,255,408 in 2023, a drop of €-5,918,358 (-
1,757%). This reflects Casino's inability to offset operational losses and financial costs. The result
points to a reliance on operational restructuring or external support to stabilize the company.

Comparative Insights
Casino's updated figures reveal significant financial and operational challenges, with declining
revenues, severe EBIT and PBT losses, and worsening net income. While gross profit margin
improvements suggest some cost management success, the overall decline across key metrics
highlights the urgency for strategic restructuring to restore profitability and financial stability. This

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includes addressing inefficiencies in operations, optimizing expenses, and exploring revenue

growth opportunities in a competitive retail environment.

Income statement analysis for Casino

Comparison between Carrefour and Casino

Carrefour and Casino present sharply contrasting financial trajectories. Carrefour showed
resilience in 2023, achieving a 5.9% revenue growth and maintaining a stable gross profit margin,
despite a decline in EBIT and PBT. Its net income improved by 27.5%, reflecting operational
stability and some reliance on non-operational gains.

In contrast, Casino faced a severe downturn, with revenue dropping by 18.6% and significant
losses at all levels. While its gross profit margin improved, driven by cost reductions, massive
declines in EBIT, PBT, and net income highlight deep operational inefficiencies and financial
distress.

Carrefour’s performance underscores stability and adaptability, whereas Casino’s results signal an
urgent need for strategic restructuring.

III. Balance Sheet Analysis

1) Liquidity
The WC of Carrefour is negative that significate current liabilities exceed current assets, so it led
to a current ratio under 1. However, this ratio is characteristic in retail sales (due to efficient cash
flow cycles and supplier credit terms). To be sure we have computed the current ratio for Casino
(one of the big competitors of Carrefour). We found also a result under 1 even lower.
Also, we can notice an increase between 2022 and 2023. This can reflect better short-term liquidity
management.

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The quick ratio (which excludes inventory) is above 1 in both years, indicating Carrefour can meet
short-term liabilities using its most liquid assets. However, the decline from 2022 to 2023 shows
that liquidity efficiency is decreasing slightly. A quick ratio above 1 is still a reassuring signal for
creditors and shareholders.
Carrefour is not an immediate liquidity crisis thanks to its quick ratio but still to be monitored in
case of rising supplier demands, for example.

2) Solvency
A debt ratio above 1 in both years indicates that Carrefour has more liabilities than assets.
Highlighting significant leverage compared to his competitor Casino whose is lower than 1 thus
having a positive impact on their financial health. The slight increase in 2023 reflects increased
reliance on debt (which could become risky if interest rates rise further). This coincides with WC.
The declining interest coverage ratio shows that Carrefour has less operating income to cover its
interest expenses, reducing its financial flexibility.

Carrefour's debt levels are manageable but high.

3) Efficiency or Profitability
A decline in ROE indicates that Carrefour is generating lower profits relative to shareholder equity.
While still positive but not like their competitor who failed to generate shareholder value, a lower
ROE may suggest weaker efficiency in utilizing capital.
Also, ROA has also declined, indicating Carrefour’s reduced ability to turn its assets into profits.
This could stem from rising costs or declining operational efficiency. But compared to one of his
competitors casinos we can see its more profitable which show us the highly competitive and low
margin industry they’re in

A sharp decline in ROI in 2023 suggests that Carrefour is earning significantly lower returns on
investments compared to the previous year.

However, EPS growth in 2023 demonstrates an increase in profitability per share, shareholders are
earning more on their investment.

Carrefour has shown a consistent increase in turnover, with revenue growing up to +5 billion € in
2023. This reflects the company’s ability to expand its operations and capture market share.

To finish, (attractive valuation) a low P/E ratio suggests Carrefour is undervalued relative to its
earnings. This could present an opportunity for investors looking for a bargain, provided the

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company can address its challenges. If Carrefour can overcome challenges concerns over specific
challenges, such as declining ROI, cost pressures, or competitive threats., it has the potential to
deliver significant returns to investors as its valuation normalizes

Conclusion
Though it’s declining profitability and high debt, Carrefour could be a good investment, but it's
not without risks. Its strong revenue growth, attractive valuation, and reliable dividends make it a
compelling option, especially for long-term investors. So, we have to believe in its ability to
overcome short-term challenges to unlock its full potential.

Advantages of Carrefour:

1. Profitability: Carrefour remains profitable (positive ROE, ROA) compared to Casino's

significant losses.
2. Revenue Growth: Steady revenue increase shows resilience in a competitive market.
3. Liquidity: Better short-term liquidity management compared to Casino.
4. Debt Management: While heavily leveraged, Carrefour can comfortably cover its interest
expenses.

Concerns for Carrefour:

• Slight declines in profitability (e.g., ROE and ROI).

• High debt levels, although manageable, should be monitored.

Balance Sheet ratio for Carrefour

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Balance Sheet ratio for Casino

IV. Cashflow Analysis 2021-2023

This analysis will focus on Carrefour’s cash flows over the past three years, using Casino as a
benchmark for a general comparison. Key areas will include operating, investing, and financing
activities, as well as overall cash position.

Operating Cash Flow

Carrefour’s operating cash flow grew steadily, increasing from €3.661B in 2021 to €4.650B in
2023. This consistent growth highlights efficient operations and strong cash generation. In
comparison, Casino’s CFO declined significantly, turning negative at €-0.659B in 2023. This
comparison really highlights Carrefour’s ability to generate cash from its core operations.

Investing Cash Flow

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Carrefour has also maintained steady investment levels, with investments peaking at €-2.134B in
2022, reflecting reinvestment in growth. By 2023, these outflows decreased to €-0.739B, signaling
a more controlled investment approach. Casino’s investing activities were inconsistent, with a
€0.108B inflow in 2022, likely from asset sales, but minimal reinvestment in 2023 (€-0.143B).
This reinforces Carrefour’s stronger reinvestment strategy compared to Casino.

Financing Cash Flow

Carrefour focused on debt repayments and shareholder returns, with financing outflows totaling
€-2.719B in 2023. This strategy reflects disciplined financial management and a commitment to
deleveraging. In contrast, Casino relied on borrowing, with a €0.188B inflow in 2023, highlighting
its dependency on external financing to support operations.

Cash Positioning

Carrefour’s cash position improved over the period, rising from €3.703B in 2021 to €6.290B in
2023. This demonstrates good liquidity management and financial flexibility. Casino’s cash
position, in comparison, declined from €2.223B in 2021 to €1.755B in 2023, further emphasizing
Carrefour’s stronger cash flow performance.

Key Ratios

Carrefour’s financial ratios show its strong cash flow management, especially compared to Casino
and industry averages. Its operating cash flow ratio of 0.81, well above the industry average of

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0.60, highlights its ability to meet short-term liabilities with ease. Casino, with a ratio of -0.12,
struggles to generate enough cash from operations to cover obligations.
Carrefour also outperformed on Cap Ex coverage, with a ratio of 2.51 compared to the industry
average of 1.50, showing it can fully fund investments with operational cash. Casino’s ratio of -
4.61 reflects heavy reliance on external financing to sustain even basic reinvestments.
Lastly, Carrefour’s debt coverage ratio of 1.82, higher than the industry’s 1.20, demonstrates its
solid ability to manage debt, while Casino’s negative -0.10 signals severe financial stress.
Overall, these ratios highlight Carrefour’s financial discipline and resilience, while Casino’s
results point to significant challenges that require strategic attention.

V. Conclusion
It is difficult to take a definitive stance on investing in Carrefour, given its recent performance,
which, despite some positive aspects, also reveals significant weaknesses. While net profit has
increased, this does not reflect the company’s true operational performance, as the rise is largely
driven by non-recurring exceptional revenues, such as asset sales or other one-time gains. These
factors skew the perception of long-term profitability and may mislead investors who do not
consider these elements.

Key operational indicators such as EBIT (operating profit) and PBT (profit before tax) are in
significant decline. This highlights challenges in effectively managing costs amid pressures from
inflation, rising energy prices, and labor market constraints. These metrics, which reveal the
company’s true health, could deter rational investors or those seeking stable opportunities.

Additionally, the global macroeconomic context is unfavorable for the retail sector. Inflation has
increased operational costs, while strong competition and consumer price sensitivity continue to
squeeze margins. These conditions, coupled with Carrefour’s high debt levels, make the company
more vulnerable to economic shocks or rising interest rates.

That said, Carrefour retains strengths that may appeal to certain investors. Its position as the
European leader and the world’s second-largest retailer provides it with resilience in a challenging
market. Its strong cash flow and ability to generate liquidity offer opportunities for reinvestment
and debt reduction, which could strengthen its financial position in the medium to long term.

For a long-term investor with a higher risk tolerance, Carrefour could represent an interesting
opportunity, particularly if the company succeeds in improving operational efficiency and
diversifying its revenue streams. However, for a more cautious investor or one seeking stable
returns, the current challenges and macroeconomic uncertainties make this investment too risky in
the short term.

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In summary, Carrefour holds potential for investors willing to take risks with a long-term
perspective, but for a more conservative approach, it would be wise to wait for clearer signs of its
ability to stabilize profitability and reduce vulnerabilities.

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