Carrefour Reports In Line FY21; Buyback Announcement Reflects Good Capital Allocation; FVE Maintained

Carrefour reported fiscal-year 2021 results with group like-for-like sales up 2.3% (up 10.1% on a two-year basis). Within this, France reported like-for-like growth of 1.8% with like-for-like sales for hypermarkets and supermarkets down 1.8% and 1.3% respectively. Performance was mixed across formats and regions with market share gains in supermarkets in France, Brazil, and Spain. Belgium performance (down 4.2%) was particularly negative, on the back of a very competitive market and Carrefour's own supply chain issues. The company reported underlying EBIT of EUR 2.27 billion in line with the EUR 2.267 billion in our model and free cash flow of EUR 1.228 billion in line with guidance. Management reiterated guidance on free cash flow ("comfortably above EUR 1 billion per year from 2021") but did not provide one for group EBIT. Capital expenditure is now expected at EUR 1.7 billion including EUR 150 million for the integration of Group BIG in Brazil. On a positive note, management announced a new EUR 750 million buyback program, following the EUR 700 million completed in 2021. We are pleased with management's capital allocation practice, with more than 8% of current market cap returned back to shareholders in the form of cash dividends and share buybacks. We don't expect to materially alter our EUR 17.00 fair value estimate. At current levels, shares trade in 3-star territory. The grocer commented on energy and food price inflation, the impact of which has been limited to its performance in 2021 as contracts with suppliers are negotiated for the whole year for most of its purchases in Europe (in line with recent commentary by large FMCG companies like Nestle). That said, the company expects these impacts to be more meaningful in 2022 for all players in the market. The closing of the Group BIG transaction is expected at the end of the first half (2022) with more than EUR 300 million synergies expected (we don't incorporate the transaction in our estimates yet).