Carrefour SA

PAR:CA

Earnings Call Analysis

Carrefour Reports Strong H1 2024 with Key Growth in Brazil

In the first half of 2024, Carrefour achieved a 6.2% increase in recurring operating income, reaching €743 million. The company saw robust performance in Brazil, driven by a favorable economic environment and higher food inflation, boosting their ROIC by 46% to €366 million. Carrefour raised its synergy target with Grupo BIG to BRL 3 billion by 2025. In France, despite a challenging market, Carrefour maintained profitability and improved competitiveness through strategic pricing and cost-saving initiatives, alongside the acquisition of Cora and Match. The integration of these acquisitions is expected to further enhance commercial dynamism and generate strong synergies.

Current Economic Context

The economic environment is presenting a mixed bag for Carrefour. In Brazil, the company is experiencing positive consumption trends supported by higher food inflation and lower interest rates. Conversely, Europe sees low consumer spending despite stabilized inflation rates. Shoppers are making more frequent but smaller purchases and focusing heavily on promotions. Adverse weather conditions have also impacted sales of nonfood items and seasonal products.

Market Performance

In France, Carrefour has managed to navigate through a challenging market landscape. The company’s pricing strategy has restored its competitiveness to pre-inflation levels, which is reflected in a positive trend in the Net Promoter Score (NPS) and improved market share in terms of volume. Carrefour's strategic acquisition of the hypermarket chain Cora and supermarket chain Match is set to enhance its commercial dynamism by creating strong synergies and bringing in talented teams.

Latin America's Surge

Latin America, particularly Brazil, has been a key driver in Carrefour's recent performance. Benefiting from a favorable economic backdrop and higher food inflation, Carrefour has increased its Return on Invested Capital (ROIC) by 46%, reaching EUR 366 million in the first half of the year. This growth is evident across all store formats, especially Atacadão, which continues to outperform the market.

E-commerce Expansion

E-commerce has played a significant role in Carrefour's success, with a 45% rise in gross merchandise value. Carrefour has also generated BRL 2.3 billion in synergies by the end of June, surpassing its initial target of BRL 2 billion by 18 months. The company now aims to reach BRL 3 billion by 2025.

Global Financial Performance

Carrefour's global recurring operating income increased by 6.2% in the first half of the year. This improvement underscores the effectiveness of its strategic initiatives and strong operational execution.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Carrefour Half Year 2024 Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Alexandre Bompard, Chairman and Chief Executive Officer. Please go ahead.

[Alexandre Bompard, executive]

Good evening to all of you. Thank you for joining today's call to present our performance for the first half of 2024. Before giving numbers, I'd like to provide context about our current situation. The current economic context is mixed. In Brazil, we see more positive consumption trends with higher food inflation and lower interest rates.

On the other hand, consumer spending in Europe remains low, even though inflation rates have stabilized. People keep shopping more frequently, but buying fewer items each time with a focus on promotions. In addition, adverse weather conditions across most European countries have significantly impacted traffic in hypermarkets and the sales of nonfood items or seasonal products.

Some factors seem to fuel a gradual recovery in purchasing power. In particular, real wage growth should ultimately result in giving households more budget flexibility. The French National Institute of Statistics is forecasting a growth of 0.9% in 2024, after only 0.3% in 2023. However, many uncertainties remain regarding how fast these factors will translate into consumption.

Against this backdrop, since last February, we have delivered strong results in our two main geographies. In France, despite the still tense consumption landscape, we achieved a good performance. Our pricing strategy, progressively deployed category by category, has allowed us to restore a good level of competitiveness, putting us back to where we were before the wave of high inflation. This shift is already well perceived by customers, as reflected in a positive trend in Net Promoter Score and in our market shares in volume.

As planned, we manage these price investments without compromising our profitability. Besides, we have completed the acquisition of hypermarket chain Cora and supermarket chain Match from the Louis Delhaize Group. This acquisition will enhance our commercial dynamism, bringing talented teams and create strong synergies, thanks to a network of robust and highly complementary assets.

In Latin America, our recovery is accelerating and boosting our profitability. Supported by a better economic environment and higher food inflation, we delivered strong performance, increasing our ROIC by plus 46% in the first half, reaching EUR 366 million. This performance comes from all our formats and the ramp-up of converted stores.

Atacadão is outperforming the market and continuing to deliver impressive growth. This demonstrates the relevance of our commercial model with new services being rolled out in an increasing number of stores. Besides, Retail and Sam's Club also achieved very good performance.

In addition, e-commerce contributed significantly to this commercial results, with gross merchandise value rising by plus 45%. Besides, we generated substantial synergies amounting to BRL 2.3 billion by the end of June, which is higher than our initial goal of BRL 2 billion, and we achieved this 18 months ahead of schedule.

We believe that the integration has not yet reached its full potential. Progress of converted stores will continue to yield results. Therefore, we are raising our synergy target to BRL 3 billion by 2025. Meanwhile, in Argentina, we have maintained a good performance, thanks to our strong commercial dynamic and disciplined cost management.

Moving on to our global recurring operating income, it has increased by 6.2%. This growth reflects our solid achievements in Brazil and France, the acceleration of our cost savings reaching EUR 580 million and the more mixed performance in other parts of Europe. In European countries, we faced the conjunction of a low commercial dynamic in hypermarkets due to unfavorable weather across many regions, impacting nonfood sales and generating less traffic in stores, combined with a lot of negative factors specific to each country, and our price investments.

Turning now to free cash flow. Our performance is in line with last year. Over the last 12 months, we generated more than EUR 1.6 billion. This level confirms our ability to maintain a very high level of cash generation and keeps us on track to reach our goal by 2026. Our strong results also extend to our corporate social responsibility policy.

Our index reached 107% in the first half of the year. We continue to progress in several key areas with our biggest progress being on our climate change goals. 47 suppliers, among our top 100, have now committed to a 1.5 trajectory by 2026. Besides, we have reduced our Scope 1 and 2 emissions by 49%, up from 38% at the end of 2023.

As part of the CSR strategy, we also partnered with GreenYellow to install and operate photovoltaic power equipment in about 350 of our hypermarket and supermarket car parks in France. GreenYellow's expertise will enable us to achieve our goal of using 100% renewable electricity by 2030.

Behind these results, this first half has highlighted three of our key achievements that will ensure future growth and accelerate our transformation. First, our growth is driven by two [ engines ] now operating at full capacity. Our private label products now representing 37% of our total food sales. And on the other hand, our digital transformation with e-commerce gross merchandise volume increased by 30% compared to the first half for 2023, particularly boosted by strong dynamics in France and, even more so, Brazil.

Besides, retail media keeps developing. Unlimitail is progressing rapidly, now being active in 13 countries across Europe and Latin America and services -- servicing about 30 food and nonfood retailers. More importantly, Unlimitail has now built the second largest client database after Amazon in Europe, growing from 40 million to 160 million addressable customers in one year. Nonfood retailers provide a more comprehensive view of customers, hence allowing for better targeting. These are strong assets, which give us a lot of confidence in Unlimitail's potential.

Second, we are also very active in rolling out our successful format. We are now operating Atacadão in France with our first store opened in June. And in Brazil, we have opened three smaller stores to reach new customers called Atacadiño.

Regarding franchising, we are expanding and attracting new franchisees, adding a total of 166 new stores in the first half in France. We expect 200 new stores to open in the second half, which would lead to a record number of franchise opening in one year, demonstrating the strong appeal of our franchise model. We are also forming new partnerships with retail banners such as Match in France.

Last, one of our strengths is the ability of our team to simultaneously manage multiple integration projects, which is crucial for reinforcing our presence in our key geographies. This has been demonstrated through successful integrations in Brazil, in France, Spain and Romania over the last year. In this regard, 2024 will be definitely one of the most active year for growth.% All these's reasons, we look at the second half of the year with confidence, and we are confirming our objectives for growth in EBITDA, recurring operating income and free cash flow in line with the Carrefour 2026 plan trajectory.

Finally, we've just two days until the opening ceremony, let me say a last word from the games. This event is a unique opportunity for our brands and our engagement. We are proud to be the first retailer to partner with the games, providing a unique showcase for our brand on a global stage.

Additionally, this partnership is fantastic for the engagement of our teams with multiple store-related initiatives, which boosted cohesion and enthusiasm. The games are also an occasion to leave a lasting legacy, reinforcing our mission of making sustainable food accessible to everyone, and our dedication to supporting disabled persons and making our society more inclusive.

To wrap up, I would like to thank our teams and franchise partners, who make all these transformations possible. Our performance is the result of their exceptional commitment and their expertise. Thank you for your attention. I will now hand over to Matthieu.

[Matthieu Malige, executive]

Thank you, Alexandre, and good afternoon to everyone. It's a pleasure to be with you all to cover our H1 2024 financial results in detail. Let's also review with Q2 sales on Slide 7 of the presentation.

Total sales for the quarter reached EUR 22.7 billion, increasing by 8.9% at constant currency. Group like-for-like sales were up 10.8%. Expansion and M&A had a negative contribution of 0.2% over the quarter, mainly due to the transfers to franchise and lease management in France. Petrol contributed negatively for minus 0.8%.

And the calendar effect was a negative 1%, reflecting the timing of Easter in March this year versus April last year. ForEx had a strong unfavorable impact on total sales growth of minus 11.7% over the quarter, essentially reflecting the depreciation of the Argentinian peso and the Brazilian real. In total, reported revenue was down minus 2.9% in Q2.

Before getting into more detail on our different markets, let's have a look at food inflation in Europe. After a sharp and regular slowdown month after month in each of our European countries, food inflation stabilized over the last three months at low single-digit levels. On a month-to-month basis, you can see that prices have remained relatively flat in France over the last 12 months.

Let's now detail France on Slide 9. In Q2, the market was marked by the slowdown in food inflation and still negative food volumes. In H1, Carrefour has implemented an aggressive price investment policy with no particular reaction from competitors to date.

As a consequence, Carrefour France's competitiveness has substantially improved and is now back to where it was before the wave of high inflation. This has been well perceived by consumers as reflected by an increase in NPS and market share dynamics, which stabilized in volume terms at the end of the quarter. In this context, like-for-like sales were down 2% in the first half.

In Q2, adverse weather conditions impacted our sales, notably in nonfood and the traffic in hypermarkets. This resulted in a decrease of minus 3.5% of like-for-like sales over the quarter. At a profit level, we managed to offset the price investment, thanks to our reinforced cost reduction dynamic.

We also benefited from the contribution to profit of the strategic initiatives of the Carrefour 2026 plan, including the increase of sales of Carrefour-branded products, the conversion to franchise and the continuous improvement of the profitability of digital activities. Thanks to this, Carrefour France kept growing profitability, both in absolute terms and in percentage of sales. Over the first half, recurring operating income was up 6.2% at EUR 286 million, with a 14 bps increase in operating margin to 1.6%.

Moving on to Slide 10 and our performance in Europe. Our European markets also experienced slowing food inflation over the first half. In most of our markets, the impact of the past high inflation wave is still present. Consumption trends are sluggish, with volumes still under pressure.

Our Western European markets were also marked by adverse weather conditions, especially compared to last year, impacting seasonal nonfood and traffic in the hypermarket. On top of this, we had a number of country specifics, which led to a recurring operating income down to EUR 84 million in H1. Recurring operating income decreased in all our European markets, except Belgium, which was up.

Country specifics include the following. In Spain, in order to reinforce our price competitiveness in the country, we invested in price across H1, which had a direct impact on sales and profitability. The profitability of financial services was also down on lower interest margin. Italy suffered from the decrease in sales and a promotional market, but maintained its competitiveness. Like-for-like numbers for Belgium are blurred by comps.

We have delivered a record-high level of performance in H1 2023 on the back of large disruption at one of our key competitors, which had strongly lifted sales up 12% in Q2 last year. We are now back on a normalized situation and the underlying performance is satisfactory, both in terms of top line and margin.

Recurring operating margin was slightly up in Belgium. Romania was a slight decrease in like-for-like sales, reflecting some stabilization in volumes, offsetting the drop in inflation. June was actually quite strong, Romania being the country with favorable weather conditions.

In parallel, we are actively integrating the Cora hypermarkets we acquired last year, with some temporary costs related to stock conversions affecting recurring operating income in H1. Last, Poland faced highly competitive markets. To conclude on Europe, as various negative drivers were either one-offs or temporary, we believe that recurring operating income trend of H1 should not replicate in H2.

The situation is clearly different in Brazil, where a number of signals have now turned to green, as you can see on Slide 11. The Brazilian market, as a whole, has improved, with both volumes and prices in positive territory. In this context, Carrefour Brazil delivered solid figures, which were lifted by our self-help initiatives. Atacadão, which accounts for more than 70% of total revenue in the country, delivered a strong Q2 sales growth of 7.4% like-for-like, a clear acceleration versus Q1. The rollout of service corners in 80 stores today and a very efficient commercial strategy to our B2B customers were incremental to the performance, together with the ramp-up of converted big stores, which delivered a solid plus 21.4% like-for-like growth during the quarter, maturing as expected.

Retail also posted solid numbers, with like-for-like sales in positive territory at us 2.3% over the quarter, with strong performance in nonfood. We keep optimizing the Retail portfolio with conversions of Carrefour stores to Atacadão and Sam's Club and the closure of nonprofitable stores, mostly supermarkets. In total, we see margins improving in the Retail format.

All other business lines are also well oriented. Sam's Club keeps growing, with 7 new stores added over the last 12 months, of which three in Q2, and sound like-for-like growth driven by a 25% increase in active members. E-commerce keeps growing strongly, with GMV up 41.3% in Q2, driven by Atacadão.

Banco Carrefour delivered a solid increase in billings and credit portfolio, while the delinquency rate kept improving regularly since Q2 last year, thanks to an efficient credit guarantee strategy. At the same time, we get increasing benefits from the integration of Grupo BIG. The stores converted to Atacadão generated an EBITDA margin of 3.6%, which materially contributed to the overall margin enhancement in the cash-and-carry format.

Ex-Grupo BIG stores have now all been converted to the Atacadão or Carrefour banners for a year. They have all ramped up and are now outperforming their historical numbers and delivering positive commercial synergies. These commercial synergies add up to the cost synergies, which have already been actively implemented since the completion of the transaction in May 2022.

As a consequence, as of June '24, Grupo BIG synergies have reached a run rate level of BRL 2.3 billion. This is above our initial target of BRL 2 billion and is achieved 18 months ahead of target. As we keep optimizing costs further and our sales keep picking up in the converted stores, we are confident that, by the end of 2025, we will reach at least BRL 3 billion of synergies.

Regarding Argentina, like-for-like sales were up 233% in Q2. Once again, Carrefour demonstrated the strength of its model as the country faces hyperinflation. Thanks to strict cost discipline, recurring operating income remained broadly stable at EUR 51 million.

Moving on to our global P&L on Slide 14. Group's recurring operating income increased by 6.2% in the first half to EUR 743 million. Gross margin was down 37 basis points to 19.4%. Our strong price investments throughout H1 and transferred to franchise in France were the key drivers of this decrease.

Distribution costs represented 15.1% of sales, a significant reduction of 53 basis points versus last year as we delivered strongly on our cost savings plan, with EUR 580 million in H1. This is in line with our objective of EUR 1.2 billion for the full year, which we revised upwards last April. All this leads to an increase of 11 basis points in group's operating margin to 1.8%, driven by Brazil and France.

Moving on to the bottom part of our P&L on Slide 15. Nonrecurring expenses reached EUR 126 million, EUR 60 million lower than last year, mainly on lower reorganization plans launched this semester. Net financial charges increased significantly in H1 to EUR 430 million. As you can see, cost of debt and interest expenses related to these commitments increased only marginally. The main driver behind the increase is the impact of IAS 29 hyperinflation accounting in Argentina.

Given the strong variation in inflation and ForEx this first half, the impact is significant, mainly noncash, and exceptional in nature. Net income from discontinued operations of EUR 761 million in H1 2023 corresponds to the capital gain on the sale of Carrefour Taiwan. Bottom line, net income, group share, adjusted for discontinued operations and exceptional items, reached EUR 313 million compared to EUR 306 million in H1 last year.

Net free cash flow on Slide 16 was roughly stable compared to H1 last year at minus EUR 1.7 billion. Let me highlight the key moving parts. EBITDA increased by EUR 64 million. Change in working capital improved by EUR 149 million, notably driven by a recurring reduction in inventory, especially in nonfood. Asset disposals decreased by EUR 50 million.

Last, net cost of debt was roughly stable. Over the last 12 months, we generated EUR 1.6 billion in net free cash flow. We confirm that the full year number should be in line with the initial growth trajectory towards the objective of above EUR 1.7 billion in 2026.

We provide, on Slide 17, net free cash flow, excluding real estate CapEx and disposals. Carrefour was a net seller of real estate for EUR 112 million in H1 2024 compared to EUR 141 million in H1 2023. Keep in mind the strong seasonality of real estate CapEx, which are geared to the second half. Excluding real estate, H1 2024 net free cash flow improved by EUR 8 million.

I will now complete this H1 financial review with a few words on net financial debt, which was slightly up. Our net free cash flow over the last 12 months was EUR 1.6 billion, as you see on the slide. Share buyback is quite high at EUR 915 million over the last 12 months, reflecting the seasonality of implementation. This compares to EUR 700 million for full year 2024.

We had EUR 145 million of cash out for M&A. It includes the acquisition of SuperCor in Spain and ex-Casino stores in France. ForEx and others notably include the impact of the devaluation of the Argentinian peso in December 2023, as already presented in the full year release.

This completes my presentation. I thank you for your attention. Alexandre and I are now available to take your questions.

[Operator]

[Operator Instructions] We will now take the first question from the line of Sreedhar Mahamkali from UBS.

[Sreedhar Mahamkali, analyst]

I've got three. If it's easier, I'll just go one by one, perhaps. I think we're all trying to understand how we should read the first half into what the full year outcome is likely to be. So just help us understand, is it reasonable to assume a similar growth, in percentage terms, 6% or so in ROI for the second half also? And from a shape point of view, would that still be driven by France? That's the first question. Do you want me to go through the other two or?

[Matthieu Malige, executive]

Yes. Please go ahead with your other two [indiscernible].

[Sreedhar Mahamkali, analyst]

Okay. So the second one is, I mean, actually, you've talked about Europe first half profit trend should not be assumed for second half. But I guess, can you talk about why that isn't representative, given you've commented on lots of markets where you seem to have embarked on a wave of price investment in the first half, that probably carries on into second half? And maybe while you're addressing it, if you could just maybe quantify the financial services impact in Spain or Cora costs so we can see what are the one-offs in there and [indiscernible] model going forward?

And lastly, just on free cash flow outlook. If you could give us a sense of what we should expect from real estate disposals for the full year, if you have any thoughts that you could share? And I know it's a bit premature, but any thoughts there would be helpful. I think last year was like EUR 470 million or something. So if you could help there, that would be great.

[Alexandre Bompard, executive]

Bonjour, Sreedhar. I would take the first two. To answer the first one, what I can tell you is that we confirm the objective we gave at the beginning of the year for full year 2024, which means positive growth in absolute terms for EBITDA, ROIC and net free cash flow in line with Carrefour 2026 plan trajectory.

As far as the recurring operating income consensus is concerned, I think it's consistent with what we see for the rest of the year. So it means that in France, we confirm that profitability should be slightly growing in full year 2024, as we saw in H1. And this is in line with the outlook we gave for 2024 earlier this year.

In Europe, and I would come back to your question about Europe. As we showed, there were a lot of specifics country-by-country in this month, and particularly in Q2. So we don't extrapolate the H1, and we are more constructive for H2. And for Brazil, considering the normalization of the conditions with positive food inflations, with volumes, with more normal competitive landscape and a lot of self-help with the Grupo BIG synergies ramping up, we are confident that profitability in Brazil is still on the ramp-up phase.

If I come back one second more precisely to Europe, there were -- this is the first time I mentioned that because the first time it has a real impact on our business. The weather conditions were particularly adverse in Q2 in our European country. It has penalizing our seasonal product categories, beverage, [ seasonables ] and nonfood. And it has penalized our traffic in hypermarkets, which were, of course, more affected than other formats.

We're also investing in prices across all markets. And there are specific elements country-by-country, for instance, Romania has been temporarily impacted by the integration of Cora. In Romania, we went, of course, recorded it in the recurring operating income. Belgium, in this semester, faced very high particular comps related to the performance of our main competitor last year. So there are really specific elements accounting for the performance in H1, and we are more positive for H2.

[Sreedhar Mahamkali, analyst]

Got you. If I could just very briefly follow up, please. Does that mean you think the full year consensus ROI of EUR 2.5 billion reflects what you are expecting in the second half to be a recovery? Is that fair? Just reading from what you're saying.

[Matthieu Malige, executive]

Yes. So well, as usual, Sreedhar, we don't point to any specific number. But indeed, we've seen that when we see where the consensus is. It's consistent, as Alexandre says, with what we see internally for the rest of the year.

Let me answer your third question regarding net free cash flow outlook and real estate disposals. Well, obviously, real estate disposals depends on opportunities that we may find in the market to divest at the right economic conditions.

That being said, we have an active portfolio rotation policies in place years after years. So we know that last year was particularly strong, with a good opportunity we had from a sale and leaseback in Brazil. It could be a little lower this year. We'll see how H2 plays out, but it will remain in the same order of magnitude. We have no specific operation in mind or that we would be working on.

Again, we've provided you, as we did last year, the real estate CapEx and the real estate disposals so that you can compute the net free cash flow, excluding these terms. You may remember that we were, over the past few years, quite neutral with the level of divestments being equal to the level of CapEx.

Now on the outlook for the cash flow and the guidance. So as we said, we think that we maintain our guidance to come back on the trajectory, the material trajectory for 2024 that we shared with you as part of the strategic plan. We're at 1.6% over 12 months, which is probably a little above the curve. You may remember, we had a particularly strong H2 last year. So with a more normal H2 for this year that we anticipate, we think that we should be in line with our expectation for the end of the year.

[Operator]

We will now take the next question from the line of Izabel Dobreva from Morgan Stanley.

[Izabel Dobreva, analyst]

My first question is just to come back on the question of the consensus. So when you say that your expectations are consistent with the EUR 2.5 billion, does that mean that you're happy with the EUR 2.5 billion? Or do you mean that you do expect the second half profits to be up year-on-year? Because the consensus currently has second half profit up 12% year-on-year, so I just wasn't sure how to understand your comment there. That's my first question.

Then my second question is on Europe. Could you break out the drivers in a bit more detail? So you have called out integration costs of Cora, the bank impacts in Spain. Could you also share with us the energy cost reversals? Because, I guess, the main aim would be to try to work out what's happening in your underlying business cleaned up for all of these moving parts so we can understand the true competitive position of the business.

And then my last question is, again, on Europe. You talked about the competitive landscape and the price investments. Are these price investments self-funded by your efficiency schemes and the Eureca program? Or are the price investments currently exceeding your self-help levers?

[Matthieu Malige, executive]

Thank you very much, Izabel, for your questions. So well, I think our position is quite clear on the full year consensus, and we're not going to detail it quarter by quarter. We think that in terms of the full year picture, it is consistent with what we see internally for the rest of the year. Then I'll let you make your computation, Alexandre, in answer to Sreedhar on what were the main dynamics that we were seeing on a region-by-region basis.

[Alexandre Bompard, executive]

To come back to your question on Europe. It's always quite particular to speak about Europe, as it was a completely homogenous country for us. As you know there are different countries. We have different positioning. They have a different role in our portfolio of countries. So it was not easy not to talk of Europe as a whole.

But to try to continue the discussion we have before with Sreedhar, what is common in the countries? I talked about weather conditions. We can speak about investing in prices across our markets. To answer your last question, investing in prices across our market means that we finance that by our cost economy plans. And that's the way, as you know, we do that. And we offset the investment by the acceleration of our cost-saving plans. It's the case in France and the case in Europe, exactly the same type of dynamic.

And after your question about cleaning up things, it's very complicated to answer. You're right. We'll begin to have, in this first semester, better science about energy. As we told, it would last two years. It was the first semester where we have a more positive dynamic for us. Widespread in all the countries except Belgium. But in the meantime, there are other trends like, for example, the acceleration of cost of transportation. And that's part of our business. So energy is part of our business. Transport is part of our business. So we can't really clean something because there are other elements [indiscernible].

To conclude, what we have is that we have faced specific elements in each one. Competitive landscape is rigorous. We know this competitive landscape. We have to invest. We have invested in Spain, particularly. In Spain, for example, there has been a specific element which was related to the financial services. We are more confident about H2. We finance our investments by our cost savings, and that's why we are confident about our capability to deliver a better performance in H2 in Europe.

[Operator]

We will now take the next question. We can come back to Izabel next. Next question is from Frederick Wild.

[Frederick Wild, analyst]

So first question for me, please, is whether you have any sense of the scale of the weather impact as you moved through the quarter? And I guess the second question related to that is, when you've seen better weather, I think some has come in June and now particularly in July as well, how's the consumer respond to that? And have your sales responded to that, both in France and across those European geographies, particularly Spain?

And then finally, could I just get a sense of how to triangulate the Half 2 margin in Europe, please? You said there were quite a few one-offs affecting it in Half 1. But I mean, is it realistic to think that as those exit and as you manage to offset the price cuts as you're saying with the savings program that you can deliver a flat margin in Europe in the second half?

[Alexandre Bompard, executive]

Merci, Frederick. I will take the first. I think it's the first time in my retail career I mentioned weather, not because I need it, but because it has had a real impact, a major impact on our business in majority of our European countries, and not to say all the European countries, because it has really affected some key categories for us at this moment of the year.

Beverages, seasonal, nonfood, you imagine the consequence of this weather on the seasonal product that we usually retail. And it has, all the more, affected the hypermarket and the traffic in hypermarkets, which were, of course, more penalized than any format. And we need this product. We have a good traffic in hypermarket. Our customers, we are not looking for them because of the weather. So it has had a huge impact.

And for example, in Italy, to tell you a word about weather, still. Last year, the second quarter was incredibly warm and incredibly positive for this type of product. This year has been extremely bad on the [ sell side consequence ]. That's why we mentioned it, and that's why it has an impact. As you can imagine, I'm not a meteorologist, even if I would [ weigh most ]. But I think that the impact on the second part of the year wouldn't be -- and to be honest, couldn't be the same.

[Matthieu Malige, executive]

As far as your second question is concerned, Frederick, as on the opportunity margin, image 2. So there's a number of specifics. We've been covering that earlier in the discussion. And so we think that they will not replicate in the second half. The integration cost for Cora in Romania are mostly behind us. So that's good news.

There's a number of other specific entities, including the bank in Spain, where we are more constructive. And then there is the uncertainty of the market, as we said, in terms of framework. Purchasing power is progressively restoring, with salaries inflating higher-than-general inflation. So that's good news.

Volumes are still under pressure in this first half, but they are progressively normalizing. So the that is positive for the second half, but we'll have to see at what speed are these materializing. So one-offs, positive dynamics, but quite uncertain. So we'll see how to give you a precise guidance on Europe at this stage.

[Operator]

We will now take the next question from the line of William Woods from Bernstein.

[William Woods, analyst]

The first one is just on trend. Do you think you've done all the price investments that are necessary to not just stabilize market share but to improve market share? The second one is on Brazil and the consumer. Could you give us some more details on what you're seeing, apart from just volume stabilizing, that gives you confidence that we're going to see an inflection in the Brazilian consumer? And then the final one is just some of your peers have commented on inflation started to kick upwards with some commodity prices increasing across different categories. Are you seeing any evidence that inflation might start to tick upwards in the second half?

[Alexandre Bompard, executive]

Thank you. Of course, you're right, we have invested significantly in France. And we are now back to our price positioning before the inflationary peak. We believe that we are investing in the right amounts. We have decreased price by 10%, on average, on more than 2,000 products since the beginning of the year. And we have also developed local initiatives on top of the national ways.

These investments have not triggered any major reaction from our competitors, which leads to a real improvement and material improvement of our positioning in the market, as you can see in all public price indices. What is very important for us is that these price investments have translated quickly in a clear improvement in price perception from our customers, with improvement in NPS, driven by price image, and it has also translated into stabilization of market share in volume, starting P5, P6 and P7, and constantly increasing.

So growing the market share in volume was our first objective towards the stabilization of the overall market share, and we are very pleased with that. Of course, for the moment, our market share value is penalized by the depth of our price investment. And we would continue to invest across the entire year, continuing to offset the impact of price investment, thanks to our cost-saving initiatives and the benefits from our strategic initiatives.

On your second question about Brazil, I would say, there's a combination of two positive points. First, there are macroeconomic data points to continue the improvement. We clearly see positive things about food inflation, which is normalized, about volumes, about the competitive landscape that is also normalized. And we see this macro as a conjugation, a combination of positive elements, and which is more important for us.

And our strategic initiatives keep bearing fruits. As we told before, all the formats work well. Atacadão, a remarkable dynamic. We are very pleased with Sam's. We are very pleased with Carrefour Retail. Banks is working well. So I would say, all the elements are gathered to continue the same dynamic that we recorded in the recent -- in the first two quarters.

Concerning inflation, what we do see for the moment is a very low single-digit inflation, which means, of course, that some products continue to accelerate more. For example, it's the case of [ cacao ]. But in majority, we see food inflation limited. It's really a normalization. We expected that, and that's what we see in the market for the second half.

[Operator]

We will now take the next question from the line of François Digard from Kepler Cheuvreux.

[François Digard, analyst]

Two, if I may. The first is about the market share [indiscernible]. Is it fair to assume circa 60 basis points contribution from one week of Cora/Match in this market share [ relief ]? Also, if you could specify, have you had any consolidation of Casino stores? I know it's very small, but a bit of that will be helpful.

And the second question is about Unlimitail. Do you see this venture still in its infancy or developing phase? Or do you already witnessing some substantial derived from the retail media. And these are the two.

[Alexandre Bompard, executive]

Okay. Thank you. On the contrast, we've said that -- you're right, we published yesterday the [indiscernible] today showed a 20 market share gain in value for us on [indiscernible] volume. These numbers include Cora and Match for one week out of four. So excluding Cora and Match, our market share was in line with the previous period and stable in volume.

Related to retail media. As you probably see in my introduction, we are very enthusiastic by the dynamic. Of course, we are still in moments of development, and it's really normal because the European market is less mature or more fragmented. And so it's really a story of growth and a momentum of growth. But the fact we have been able, in one year, exactly, to develop in 28 countries and to have developed many verticals other than food is very positive for us.

We clearly do believe that we can be and we will be the leader in Europe behind Amazon, of course, on that. Today, all these partners gathered in several geographies represent a total of more than 2.2 billion page views per month, 160 million customers, which means 3x or 4x the size of Carrefour in Europe.

Of course, it's a sector of innovation. We were the first player to launch partnership on Advanced TV as well as with platforms like YouTube. So it's really an era of development, of growth, of conviction of partners, of extension of geography in geography where we are not. And we are very enthusiastic with that, and very satisfied with the pace of development from the place we have already in this market.

[François Digard, analyst]

But clearly, it means that it's an investment phase on your ability to get in H1 of substantial [indiscernible] contribution from retail media?

[Alexandre Bompard, executive]

Yes, of course. It's really an investment phase. It's still a small market, as you know, in Europe, compared to the size it has in the U.S. But we see all the reasons possible that this market will develop in the next years.

[Operator]

We will now take the next question from the line of Monique Pollard from Citi Group.

[Monique Pollard, analyst]

I had three, please, as well. The first one, just on the French margin. You commented in the presentation that the drivers of that French margin improvement, you talked about the e-commerce, transfers, lease management and franchise and retail media. So just trying to understand if you can give us any color on the scope that retail media has had on the margin improvement there and also any color on e-commerce. So is it that it's getting less unprofitable in France for e-commerce, and that's what's driving the improvement on the e-commerce side?

The second question I had was on Brazil. You mentioned the online growth, particularly strong there, 46% GMV growth, online now 10% penetration of revenues. Can you comment on whether that business, the Brazilian e-commerce business, is profitable?

And then the final question I had was just on the price investments in France. So obviously, as you say, this is having a really positive impact. You've seen it on the Net Promoter Scores. You haven't seen a big competitive response. So given how strong the French margin was, and if that continues to be strong, could you look to kind of overinvest in price in the second half? Or would you just take that benefit through to profitability given you're not seeing much competitive response?

[Matthieu Malige, executive]

Thank you very much. So on the French margin buildup, so you're right, there's a number of elements which allowed us, despite the sales trends and despite the quite aggressive price investment policy that we have implemented to slightly grow the operating margin. Clearly, the first element is the cost savings. Cost savings is very dynamic. We have increased the target for the year. We delivered about half of the objective at midyear. So there is already an increase in the dynamics of cost savings in France.

Then specifically to your question, e-commerce for now, several semesters, is improving its profitability level in France with quite high level of growth. So it is really contributing to improving the profitability. The switch to franchise and lease management is also helping. We've had now many stores, ways after ways over these years, which have been transferred. And we know that once the stores are transferred, they do ramp up with the energy of the entrepreneur and the efficiency of running the stores.

And so now we have a big mass of about 30% of the hypermarket portfolio, which has been switched to lease management and franchise over the past few years, which are ramping up and improving their performance. Private labels is also a plus, and retail media is positive. But as Alexandre said, it's still small, but the good news is that it starts to contribute. It is fairly limited in terms of magnitude, but it starts to contribute.

[Alexandre Bompard, executive]

On your question about price in France. As I said, our pricing investment are spread across the entire year. And as Matthieu mentioned, we have the discipline to protect our financials, which gives us this flexibility to keep investing, and that's exactly what we announced at the beginning of the year. And that's exactly what we will do throughout the year.

Concerning e-commerce in Brazil, I think it's one of the most impressive achievements of the last year. We have a very good dynamic. As you've seen with an increase by 45% or 46%, which is very important is that now Atacadão is central in this growth. And what is very important is that we are profitable on e-commerce in Brazil. So it means that this growth is profitable for us, and we will, of course, accelerate in the next months.

[Operator]

We will now take the last question from the line of Cedric Lecasble from Stifel.

[Cedric Lecasble, analyst]

Just two small follow-ups for me, please. So first one, on the Spanish financial service business. It's a business you rarely comment on. We don't have to too many comments. I was just interested, curious about the weight of this business into Spanish operations. And kind of the impact you've seen in the first half that you don't expect in the second half, it would be very helpful.

And the second one, more generally, on potential cost savings. Considering European markets, which are different by nature versus France, what kind of flexibility do you still have at this stage on cost savings in Europe versus France?

[Matthieu Malige, executive]

Thank you very much, Cedric. Well, it's hard to -- we don't disclose specifically the financial services on a country-by-country basis. So I'm not going to do that tonight. But we mentioned just a few elements, which impacted the profitability of Spain in H1. And so the bank is one. It's not a huge impact, but it's visible. Again, we think that we have a very good management of the cost of risk in Spain. So this is good news. The production of credit is good as we control the granting of credit. We've had some pressure on the financial margin, but we were more constructive on that part.

Then on cost in Europe, it's really -- and it's been the case for several years now. It's really -- many plans at very operational levels, which are being rolled out, implemented. And so I think we've demonstrated quite a good control of these programs. We clearly accelerated the dynamic throughout the group, including in Europe, since the beginning of the year that pivots to revise our objective and to deliver an upward objective, well, an upward number in this H1 versus what we delivered in the first half in previous years. So still good reservoir, still good dynamics. There is no one country which stands out as having more or less potential than the other. It's still quite widespread.

[Alexandre Bompard, executive]

Okay. Thank you very much for this discussion. I wish you a very good summer on the -- see you very, very soon on the good Paris Olympic and the Paralympic Games. Thank you.

[Matthieu Malige, executive]

Bye-bye.

[Alexandre Bompard, executive]

Bye-bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.