Carrefour reports sharp drop in profits, shares crash

France's largest grocer saw profits crash over the first six months of 2017 despite rising sales, amid a large drop in recurring operating income and a growing debt pile, with management telling shareholders the second half of the year would be just as difficult.

Net sales at Carrefour jumped by 6.2% in comparison to the year ago period to reach €38.53bn and by 2.8% on a like-for-like basis, but operating margins worsened from 4.0% to 3.7% and recurring operating income (ROI) was 12.1% lower to €621m.

The news sent shares in the grocer 14.62% lower to €16.65.

Positive exchange rate effects accounted for 2.8 percentage points of the sales increase.

Despite that, adjusted net income shrank 34% to €154m.

Among the factors negatively impacting its results was a 70 basis point operating margin drop in France, in part due to higher losses at ex-Dia stores.

Higher losses in Argentina and charges from integrating acquisitions were also factors, the company said in a statement.

Management also alluded to the need to adapt to "rapid and far-reaching" evolutions within the industry.

Excluding cargo and exceptional items, free cash flow worsened from -€2.11bn to -€2.59bn., which the outfit attributed to short-term variations in its working capital requirements.

The company's net debt load increased by €353m to €7.72bn.

At constant exchange rates, full-year sales were seen growing by between 2% and 4% while at current exchange rates ROI was seen "roughly in-line" with the evolution seen in the first half of 2017.