Carrefour's Digital Day Introduces an Updated Set of Ambitious Targets in E-Commerce; FVE Maintained

In its Digital Day event on Nov. 9, Carrefour presented its new "data-centric, digital-first" approach, which will be based on four key pillars: 1) acceleration of e-commerce, 2) ramp-up of data and retail media activities, 3) digitization of financial services, and 4) transformation through digital of traditional retail operations. Within this, the grocer also revealed specific financial targets in connection with the new digital strategy. Carrefour now aims to triple its online GMV (gross merchandise value) by 2026 to reach EUR 10 billion (from around EUR 3.3 billion expected in fiscal 2021), which it expects to contribute an additional EUR 600 million to recurring operating income in 2026 versus 2021, implying a 9% marginal profit margin. The required investment to enable this will be about EUR 3 billion (by 2026 or about 50% increase in digital investments) or an expected 20% return on investment, higher than that of some of its peers. As a result, the group is raising the annual capital expenditure budget to EUR 1.7 billion (from EUR 1.5 billion-EUR 1.7 billion guidance previously). We note that a number of grocers in our European coverage have started to introduce specific financial targets in connection to their online channels, which is in line with our thesis that online constitutes an opportunity for scaled grocers that are willing to invest in new capabilities (technology and automation) and revenue streams (advertising and data monetization). We don't expect to change our EUR 17.00 fair value estimate and no-moat rating for Carrefour. At current levels, shares trade in 3-star territory.