Carrefour S

Carrefour S-A. Source: Case Studies in Finance 5th edition Tata Mc Graw-Hill Edition

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, 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 $enerall' finane om"an'$rowth $rowth throu$h throu$h seuriti seurities es enomin enominate ate in the urren' urren' of !usines !usiness s o"erati o"erations. ons. Its in&estment !ans, or$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$e of a !orro !orrowi win$ n$ o""o o""ortu rtunit nit' ' in that that urre urren' n'.. /ith /ith a e!t-f e!t-fina inan nin$ in$ re+u re+uire iremen mentt of  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 "rie at a ou"on rate of 5.25 in euros, 5.35 in ritish "ouns, "ouns, 3.425 in Swiss frans, or 5.5 in U.S. ollars. Carrefour S.A. In 43, Carrefour altere the worl of retailin$ with the introution of the h'"ermar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 $as station into one massi&e, one-sto"-sho""in$ 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 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 $rowth, Carrefour  "ursu "ursue e sele seleti& ti&e e a+u a+uis isiti itions ons,, inlu inluin in$ $ nota! nota!le le mer$e mer$ers rs with with Euro Euromar marh he e an an ontlau ontlaurr in , an 7romoes 7romoes in . . Exhibit 1 "ro&ies a histor' of Carrefour#s store "ortfolio from 2 to 200. Carrefour was "rofita!le in all ma;or o"eratin$ re$ions. In 200, the om"an' $enerate o"eratin$ "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 "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$ional sales !reaown was  "erent from Asia, 2 "erent from >atin Ameria, an 32 "erent from. Euro"e outsie *rane. *or Carrefour, 200 was the first first 'ear 'ear that that total total sales sales outsie outsie *rane eeee eeee total total omesti omesti sales Carrefour Carrefour was the lar$est retailer in *rane. el$ium, el$ium, 6reee, an S"ain Exhibi Exhibitt 2 etails Carrefour#s onsoliate finanial statements 8he om"an' om"an' e"ete e"ete  to maintain maintain its e"ans e"ansion ion tra;eto tra;etor' r'.. Carrefo Carrefour#s ur#s CE%, CE%, @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 !'

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$ement onsiere the !on-enomination eision, it also onsiere the urrent inflation, interest-rate, an ehan$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  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? 2

EDII8 

 8otal 1um!er of Consoliate Stores

*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

2 3 9 5 4  <  2000 200 9