Carrefour

Topics: Financial ratios, Carrefour, Balance sheet Pages: 4 (873 words) Published: June 21, 2013
Carrefour
In mid-1972
Decisions about speed and direction of future growth, and how to finance that growth Company Background
Begun operations in 1960 with a supermarket (650 mts2) in France •In 1963 opened the first hypermarket (2.500 mts2) just outside of Paris, France •Between 1965 and 1971 sales grew at an annual rate exceeding 50% (non food products accounted for 40% of that volume). •Corporate assets growth as faster as sales

Starting in 1970, new stores called “commercial centers” (25.000 mts2) were opened •At the end of 1971: Carrefour had 16 stores wholly owned, 5 stores operating as joint ventures, and franchise agreements with 7 stores •Their strategy was to build stores outside of towns in land that could be acquired very inexpensive. Total investment per m2 of selling space fully equipped equal to about one-third that of traditional supermarkets and stores •Each store manager operated as a profit center with almost complete freedom in decision making (decentralized management) Factors favoring growth

Consumer acceptance was due to Convenience and price. oVariety of products (almost any product purchased more than once a year could be bought at a Carrefour store) oCarrefour operated discount gasoline outlets at many stores oCarrefour operated on an average gross margin of about 15% (on food and nonfood items) oThe gross margins (and by implication, the prices) of traditional retailers averaged 5 to 10 percentage points above Carrefour´s

Obstacles to growth

Political force of small shopkeepers.
National and local governments made it difficult to obtain construction permits to build new large retail stores, as an effort to slow the growth of hypermarket. •Tax to retail store to provide pensions for smalls shopkeepers that were unable to continue in business. Joint ventures and franchises

Under franchising, Carrefour received a fee of 0,2% of total store sales and a fee of 1% of the store´s sales of nonfood items...
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