Carrefour SA

PAR:CA

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to the Carrefour 2018 Third Quarter Sales Conference Call. I now hand over to Mr. Matthieu Malige, Chief Financial Officer. Sir, please go ahead.

[Matthieu Malige, Chief Financial Officer]

Thank you. Good afternoon, everyone, and thank you for joining us on this call to present our 2018 Q3 trading statement. I'm here with the Investor Relation team. You have no doubt seen the press release that we issued earlier. I will be referring during this call to the presentation that you can download on our website. Before walking you through the details of our third quarter sales, I would like to share with you a few highlights. Concerning our sales performance, there is one important message today. Our sales growth has accelerated in Q3. This is attributable to 3 key elements: first, an improved commercial performance by Carrefour in a number of geographies, and notably in France, where Carrefour has reduced its performance gap versus the market. In France, Carrefour post the best quarterly food sales growth since 2015. Second, a strong e-commerce dynamic with online food sales growing more than 30%. And finally, slightly better market trends.Beyond sales performance, this quarter saw strong momentum in the implementation of the Carrefour 2022 transformation plan. Let's focus on some of the key milestones that attest to the sustained dynamic that is underway. First, we are continuing to ramp-up of our omnichannel offer in all countries. In H1, we had already flagged the launch of single-entry websites in Brazil, Poland and Romania. The rollout of Click & Collect and home delivery and the expansion of Drives. This dynamic continued in Q3 with the launch of a single merchant website in Italy putting us on track to achieve our target of deploying single websites to access our online offer in all countries by the end of the year. The development of order preparation tools continues with hybrid solutions, combining in-store picking with a dedicated compact platform in the reserves of the store. Additionally, we are accelerating the rollout of Drive with 55 opened in France in Q3 alone, bringing the total year-to-date to 133 in France. We opened 16 new pedestrian Drives since the start of the year. With pedestrian Drives, Carrefour offers customers the possibility to collect their online orders in a Carrefour pickup point of their choice located in city centers. This offers city center customers the possibility to benefit from a large assortment at hypermarket prices. Carrefour is in advance in these new service and will develop it at fast pace. In Brazil, we are rolling out Drive and Click & Collect with a positive initial response. In China, we have extended the O2O offering to new partners and are posting very high digital growth. Second, we are progressing in the revamp of our in-store commercial proposition. In Q3, we continued our investments to reinforce the competitiveness of our stores. We are also accelerating the adaptation of our hypermarket sales area to their catchment area. You may remember that in France we set the ambition to reduce our sales area by 100,000 square meters by 2020. We have already reduced 10,000 square meters of sales area, which have been reallocated, for instance, to outlets, which are performing very well, by the way. We are in advanced studies for an additional 40,000 square meters that will be reallocated to outlets, Cash & Carry stores or hybrid online order preparation platforms off sold to the adjacent shopping mall. In parallel, sales area adaptation to local catchment area is also progressing outside France with downsizing underway in Italy and Belgium. In Brazil and in Argentina, we are transforming hypermarkets to Cash & Carry with a good commercial performance. A word on our assortments. The simplification of assortments to concentrate on high-rotation products continues. In parallel, the range of private label, organic and Filière Qualité Carrefour products is being extended. They contribute to our product offering being better adapted to our customers' needs. High-quality private labels offer more purchasing power to customers and contribute to our competitiveness. As for organic products, we are putting in place dedicated areas to highlight the offer that generate strong sales growth. In consumer electronics, we will be launching 2 tests of Darty shop-in-shops in France this quarter. Third, expansion in growth formats continues at a sustained pace. Since January, we have opened more than 300 convenience stores throughout the group, of which more than 120 in Q3. We also opened 14 new Atacadao stores in Brazil since the beginning of the year, of which 4 this quarter. We confirm the objective of 20 Atacadao openings this year. New square meters contributed to plus 6% sales growth at Atacadao this quarter. Fourth, our joint buying partnerships with Tesco and Système U are entering their operational phase. Through these tie-ups, we are moving from being an isolated company to working with best-in-class in a partnership approach to improve our purchasing competitiveness and efficiency. Both alliances are moving ahead after receiving regulatory clearance. We should see the first effects in 2019. Fifth, we are making continued headway in our efficiency plan, be it in terms of organizational transformation, cost savings, inventories or CapEx. After reaching agreement with labor unions in H1, Carrefour closed the voluntary departure plan for headquarters in France at the end of September after reaching its targets of a headcount reduction of 2,400 people. On top of that, we also achieved the removal of ex [ Fi ] stores -- ex-DIA stores from the company scope, and the transfer of 5 hypermarkets to lease management contracts. In terms of cost savings, on top of the EUR 520 million achieved in H1, further savings were made this quarter. We are fully on track to achieve our target of EUR 2 billion on a full-year basis by 2020. Concerning CapEx, we are very pleased to announce that our actions to improve productivity and selectivity are progressing well and exceeding our initial objectives. We are therefore in a position to announce that we anticipate the implementation of our 2018 investment program with a contained envelope estimated at between EUR 1.7 billion and EUR 1.8 billion. We have also continued our initiatives towards improved inventory management in all countries. This is consistent with the fact that free cash flow-related bonus objectives have been rolled out throughout the organization. Six, we are reshuffling our management profiles, both at group level and within our countries management teams. We are combining profiles with a strong knowledge of Carrefour with professionals with more digital, diverse and complementary background. This is key to tackle successfully the challenges we face. Lastly, we are progressing in our ambition to be the leader in the food transition for all. A number of bricks are now in place. Let me name a few. We constituted the Food Orientation Committee. We recently acquired SoBio, which is the starting point for the deployment of a network of specialized stores selling organic products. We signed new partnership agreements with farmers on conversion to organic farming. And we partnered with technology experts to promote blockchain for food traceability. With these bricks in place, it was the right time to launch our international Act for Food campaign to present to a wide audience Carrefour's commitments and concrete actions in favor of the food transition. This campaign is a great success with very strong impact on a high number of stakeholders outside of Carrefour, and also within the company where employees are proud that Carrefour is taking concrete actions to tackle a major challenge of this century. These examples illustrate how Carrefour continued to make great strides forward in Q3 to rapidly implement its Transformation Plan in numerous fields. Let's now analyze in detail our third quarter performance. As you can see on Slide 11 of the presentation, our like-for-like sales growth accelerated in Q3 at plus 2.1% while the first half of the year posted 0.7% like-for-like growth. This acceleration took place in France, Latin America and Asia. Europe posted the same trends as in H1. This good performance has been achieved in a context of competitive markets and complex macroeconomic environment in a number of our geographies. Our total Q3 sales reached EUR 21.1 billion, up 2.7% at constant exchange rate, of which 2.1% like-for-like. On the one hand, the quarter was impacted by a strongly unfavorable currency impact of minus 5.5%, largely due to the Brazilian real and the Argentinian peso. On the other hand, our sales were supported by a positive 1.2% effect from store openings, notably at Atacadao and proximity stores. Including currency impact, sales were down 2.8% on a reported basis. Let's now take a look at our sales performance by geography starting with France. Total sales in France where a little over EUR 10 billion, up 2.1% in total and 1.6% like-for-like. It's worth noting that the increase in like-for-like growth in France comes from all formats. It is supported by food sales, while non-food trends were negative. France records its best quarterly food sales growth since 2015. This is also true for the hypermarkets formats. There are 2 main explanations for the increase in sales growth in Q3 in France. First, Carrefour posted its stronger commercial performance than historically. It means that in Q3, Carrefour France was closer to market trends than in previous quarters. Second, we benefited from stronger market trends notably during the first part of the quarter. Let's move on to our performance in other European countries. Sales in the region reached EUR 5.8 billion, down 1.5% like-for-like. This represents a similar like-for-like trend as in H1. Our performance showed contrast in trends. Our performance in Southern Europe was disappointing Belgium, Poland and Romania showed improving trends. In Spain, like-for-like sales were down 2.7%. The Spanish markets remain very competitive in Q3. Non-food markets were negative, in particular in September. A precise action plan has been set, which includes short-term actions and acceleration of the implementation of Carrefour 2022 initiatives. In Italy, like-for-like sales were down 4.4% in a complex macroeconomic and political environment. The markets have deteriorated since the beginning of the year in Italy and are in negative territory. Hypermarkets in particular are challenged in this context. Gérard Lavinay, one of our most experienced executives, has been appointed as CEO of Italy at the beginning of October. His task is to accelerate the transformation of Carrefour Italy. Belgium improved its like-for-like in Q3 as H1 was impacted by operational disruptions. Poland improved its like-for-like performance versus H1. While Romania continued to post steady like-for-like growth. Turning to LatAm. Carrefour continued its strong sales momentum with sales of EUR 3.61 billion, up 11.7% at constant currency and up 9.7% on a like-for-like basis. In Brazil, like-for-like sales improved 5.1% with growth both at Atacadao and Carrefour Retail in a context marked by the end of food deflation and even slight food inflation over the quarter. Atacadao's strong growth was supported by continued gains in volumes and was further boosted by extension with 14 additional stores in the first 9 months, of which 4 in Q3. Carrefour Retail, for its part, showed a strong 2.5% like-for-like. And e-commerce continued to grow very strongly. Financial services in Brazil also posted an excellent performance with total billings up 30% in Q3, driven notably by the fast growth of the Atacadao credit card, which now has 1.4 million holders and accounts for almost 1/4 of billings. In Argentina, our like-for-like sales were up 29%. In a complex macroeconomic environment, commercial measures were taken in favor of the purchasing power of our consumers. They allow us to generate significant increase in volumes while the market is difficult. We conclude our geographic overview with Asia. Total sales stood at little over EUR 1.5 billion, down 2.8% like-for-like. In China, like-for-like sales trends improved, notably thanks to the growth of e-commerce, which benefits from the implementation of new technologies and new partnerships in the O2O offering. In Taiwan, the commercial momentum continued with another quarter of like-for-like growth. Before concluding, let me highlight once again that Carrefour benefits from a solid financial structure. This year, the group successfully carried out 2 bond issues for an amount exceeding EUR 900 million, confirming the quality of the Carrefour Group signature. In addition, Carrefour has undrawn credit facilities from its banking partners for EUR 3.9 billion, maturing in 2022 and 2023. Carrefour is rated BBB+ with a negative outlook by Standard & Poor's, and Baa1 with a stable outlook by Moody's. We remain committed to a very solid balance sheet. In conclusion, the third quarter the group posted better sales momentum. New milestones were achieved in the implementation of the Carrefour 2022 plan, confirming the solid transformation dynamic at work within the group. These elements reinforce our confidence in the relevance of the Carrefour 2022 plan, and the ability of Carrefour to transform itself rapidly. This was evidenced by further purchases of Carrefour shares by senior executives during the past quarter. In the coming quarters, Carrefour will continue to implement the Transformation Plan at a sustained pace, including new advances in the omnichannel offer, the acceleration of the revamp of the in-store commercial proposition and reinforced operational efficiency. These transformations aim at renovating Carrefour commercial proposition to customers in order to grow and develop our business. We confirm all targets set at the beginning of the year. As far as CapEx, we anticipate we will be able to implement our 2018 investment program with an envelope of EUR 1.7 billion to EUR 1.8 billion, thanks to our successful efforts to be more selective and productive with our investments. Thank you very much for your attention. I am now happy to take your questions.

[Operator]

[Operator Instructions] The first question comes from Arnaud Joly from Societe Generale.

[Arnaud Joly, Equity Analyst]

Matthieu, can you hear me?

[Matthieu Malige, Chief Financial Officer]

Yes, very well.

[Arnaud Joly, Equity Analyst]

Okay. So I have 3 questions. The first one, are you still comfortable with the level of consensus? And I think it is around EUR 1,861,000,000 for '18 EBIT. The second question regarding France. So 2.6% like-for-like for French hypermarket. Can you give us a breakdown in terms of volume trends and prices just to see how successful is the price repositioning and how customers responded? And the last question on Italy. So you now have Gérard Lavinay as the CEO, he successfully turnaround Belgium 10 years ago with a strong restructuring plan for stores. So do you plan to close any very underperforming stores in Italy in the coming months?

[Matthieu Malige, Chief Financial Officer]

Thank you, Arnaud. As far as the full-year recurring operating income consensus is concerned. When we think about forecasting our business, there's really 2 ideas I'd like to share with you. The first one is retail is a fast-changing industry and we clearly evolve in an uncertain macroeconomic environment. It's not a general comment. Well, just think what occurred since the beginning of the year. We had to face food deflation in Brazil, and then slight food inflation. We had to face currency volatilities, in particular, recently over the summer in Latin America. We had to face strong evolution of macro situations in a number of geographies. And we also have some political uncertainties in a number of markets. And on top of that, you know that our markets are competitive. So when it comes to forecasting retail, I think that natural prudence is the right approach, and currently at that point in history. That being said, that's my second idea. I think we're now 9 months into the year and 9 months into the plan. We are happy. And that's an idea we want to share with you tonight with the way the plan is progressing, and we're satisfied with the performance of the group over the third quarter. If we take these 2 ideas into account, I think that the -- not commenting on your number, but I think the current full-year consensus is consistent with the performance of the group after the first 9 months. On your second question, which is France, and I think you were relating to the supermarkets where we had, indeed, a 2.6% like-for-like. Well, it's clearly driven by traffic. And so people coming into our stores. You were mentioning in your question the pricing efforts that we made in H1. It's hard to know what generated this improved performance. But again, I want to say that it's a holistic effort that we make. Indeed price and competitiveness of our stores are important, but there's more than just price. Everything we do on assortments, on the qualities of the products, on private labels, on organic products, having the right store size for the customers, development of the omnichannel services, all that contributes to making our stores, and not only supermarkets in France, all our stores in all our geographies, more attractive. In Italy, well, thanks for remembering that indeed Gérard was involved a few years ago in good transformation for our Belgian operations. It's hard to anticipate what will be his precise actions. Clearly, it will be actions which will be coherent with the Carrefour 2022 plan. We have already, in the course of the quarter, closed 1 hypermarket that was in difficulties and reduced the size of another hypermarket. So I think the Carrefour 2022 initiatives, including adapting store size to the catchment area, that work has started.

[Operator]

The next question comes from Cedric Lecasble from Raymond James.

[Cedric Lecasble, Financial Analyst]

Yes, Cedric Lecasble, Raymond James. Three questions if I may. So first one on Southern Europe. Maybe you can help us a little more about your commercial remedies, as the markets are pretty tough. For Italy, it might be premature, but in Spain, for instance, what can you do to fight today the market share gains from Mercadona and Lidl? You have another competitor suffering very much in Spain. We saw it over the last days. The second question relates to the cost cutting in Q3. You mentioned it continued in Q3. You reached EUR 520 million in H1. Could you maybe give us a guideline for what you achieved in Q3? And for the whole year, could you help us maybe with -- that's the third question, could you help us with the best guess for cash out estimate when you add all your restructuring initiatives in terms of cash out from restructuring. What figure should we put in our models in 2018? And maybe a question which is closer to this one. On CapEx that you reduced, the guidance is lower. Do you think it can be sustainable beyond 2018? Or is it too early to know if this lower level could be sustainable during the plan?

[Matthieu Malige, Chief Financial Officer]

Thank you, Cedric for your questions. First question relating to Spain and the commercial remedies. As you rightly pointed in your question, the market is very competitive, and in particular in Q3. And in particular non-food markets have been tough, notably during the Back to School campaign. We have established with the management team a plan, which includes short-term actions and longer-term actions in order to improve our operations. As far as short-term actions are concerned, there are some parameters for commercial policies including promotional activity that can be fine-tuned. We can also probably address the operational performance, notably of the fresh products where we think that it's an area where we can make a difference and probably can make even a stronger difference versus competitors. In terms of longer-term actions, clearly the Carrefour 2022 plan is very meaningful in Spain, and so all actions are starting now to be implemented. There's probably 3 items in particular that probably makes more sense than others: fresh in the medium term or assortment quality and how this is shared and showed to our customers. The second aspect is organic product. It's clearly an area where I think we have developed know-how at group level. And I think it is a meaningful, in particular for the Spanish market. And the other point is private labels. We have players, and notably the 2 ones that you mentioned who have an offer in private labels. It's an area, and here also there are group initiatives where we can improve our ranges and the qualities of the products. Coming to your second question relating to cost-cutting initiatives. As I said, we have progressed and continued with the momentum of H1. It's true in all areas and geographies. As you know, these cost-cutting initiatives, it's a high number of very operational initiatives in all formats and all countries of the group. So again, good dynamic that has continued. And on the back of the good momentum over the 9 first months, I can confirm to you that we are confident in the dynamic and we are confident in reaching the EUR 2 billion target for 2020. In terms of full-year cash outs estimates, notably relating to the Transformation Plans. In H1, we shared with you the total non-current expenses that we recorded in relation to these Transformation Plans. A number of them were recorded on the nonrecurring expenses. Another part notably relating to the ex-Dia stores exiting the perimeter of the group were recorded in discontinued it is. It's fair to say that's a big portion of these amounts, probably 70%, 80% will be cashed out before the end of this year with the rest at the beginning of 2019. It's really an analysis on a person-by-person basis, depending on the type of solutions that they have elected for, for entering into the various plans. So there is still work in progress, but I think that's the fair estimate that can be made. In terms of CapEx, and asking me about what can we foresee for the following years. One point is clear is that productivity and selectivity efforts will continue. The good performance of CapEx control this year gives us more room for extra projects to accelerate even further our transformation. So for the coming years, clearly CapEx should be below EUR 2 billion, thanks to the productivity efforts that we have made. For next year, it's too early to come up with a precise number. We're still working on our investments projects. But, well, the good dynamics will continue.

[Operator]

The next question comes from Andrew Porteous from HSBC.

[Andrew Ian Porteous, Analyst, European Retail]

Three, if I could do. You talked about, I think, feels like fresh and private label are sort of sort of 2 key areas within your 2022 strategy. Could you give us some idea of where growth is in those categories within your overall numbers? Are you outperforming there? And perhaps is private label more about next year and the Tesco agreement? Second, you talk about food growing better than nonfood. Could you just talk about whether you're gaining share in food, yes, or whether you feel you're outgrowing the market? And then lastly, and just before we get too excited, it does feel like you've slowed a bit towards the end of the quarter. Should we – are exit rates a bit lower than the average in these numbers, and perhaps should we expect a little bit of a slowdown next quarter?

[Matthieu Malige, Chief Financial Officer]

Thank you, Andrew. Just to understand -- well, your first question, you mentioned private label. And your second point in your first question?

[Andrew Ian Porteous, Analyst, European Retail]

It was about fresh, whether that's outgrowing.

[Matthieu Malige, Chief Financial Officer]

Fresh, yes. Well, so on your first -- on the first one relating to private labels. The dynamics is to clearly develop private label. You remember that historically Carrefour was a leader in private label, and we think it's an important point for us in order to improve our brand image and give more purchasing power to our customers. So we've gotten organized since the beginning of the year with a new private label director, new approach shared by countries with in-depth review of the ranges in order to extend the ranges and improve the recipes. Clearly, we will benefit from our sourcing alliance with Tesco. You know that private label is about 50% of sales at Tesco. It's only 25% at Carrefour. So we will be benefiting from their experience. And we will be sourcing private labels in common, including raw materials as part of the alliance. So it's still in early stage, to answer precisely to your question, but clearly gaining momentum as the assortments are building up, but more effects to come in the coming years, clearly. Fresh. Well, it's progressing. I think it's too early to get to a conclusion here. It's really detailed work in all countries. As far as your second question relating to food growth and where we were getting that growth from. Well, it's always hard to know where you take growth from. But again, I think, and as I answered on a previous question, I think we have a holistic movement, improving services, improving products, improving competitiveness that goes through, and it's good to see that our relative absolute, but also relative performance versus the market improves in Q3. As far as the pace -- of your first question relating to the pace and the dynamics inside the quarter, we think that our performance is steady, then you always have elements relating to markets when you look at various data, and notably the Banque de France data that were published recently. There was lesser dynamics in September than in the previous 2 months of the quarter. So I think we've been part of that dynamics. We've been hit by the dynamics. I don't think it's an element that allows us to draw any conclusion for the dynamics of the fourth quarter.

[Operator]

The next question comes from Nicolas Champ from Barclays.

[Nicolas Champ, Director]

The first one is, could you please quantify the level of food inflation during the quarter in France, please? Second one, I mean again to follow up on the previous question, I mean so you mentioned that the market environment was a bit more dynamic in July and August than in September. But could you elaborate on your anniversary campaign? And maybe give us some color regarding the start of the quarter of the Q4 in terms of activity in France? And the fourth -- third question, sorry, again regarding French supermarket where you posted a very dynamic performance at French supermarket. Is it mainly driven by an increase in traffic or basket? A question whether this good performance is a consequence of the price investments you implemented earlier this year. Is it a sensible conclusion to draw from your dynamic like-for-like sales performance at the French supermarket?

[Matthieu Malige, Chief Financial Officer]

Thank you, Nicolas. On your first question relating to inflation in the quarter in food in France. Well, I think inflation is very limited. It's close to 0. You have various ways to look at it. But I don't think that our model is -- benefits from any specific food inflation in the third quarter. As far as the dynamics, and notably the anniversaries and the -- and how we can extrapolate that. Well, we had only a few days of the anniversaries on the last days of September. You need to -- you know these campaigns, you need to evaluate them when they're over, and on the basis of the food program. So nothing specific to say there. We will make comments as part of the Q4 comments early next year. And I don't think there's much that we can share at this stage on how the first days of Q4 are progressing. Your third question relates to the French supers. It's a bit the same question as Arnaud earlier. Clearly, as I answered, more traffic-based dynamic beyond the strong like-for-like growth in the supermarkets in the quarter. Again, hard to point one specific item. We are improving a high number of parameters for commercial and value proposition to our customers in all formats, and also in the French supermarkets. So hard to point one specifically. But again, a number of parameters are improving, I think that's important.

[Nicolas Champ, Director]

Is your price perception improving among the various parameters? Your price perception for the French supermarket?

[Matthieu Malige, Chief Financial Officer]

It's too early to point specifically at a given indicator. We indeed shared with you that we evaluated at the beginning of the year that the French supermarkets were a priority for improving price positioning. So at the end of the first quarter, we indeed started to improve our competitiveness. Hard to know how fast it is perceived by customers. How they perceive a specific element versus all the other aspects that are improving in the stores. So hard to point specifically on the impact of the price investments.

[Operator]

The next question comes from Maxime Mallet from Deutsche Bank.

[Maxime Mallet, Research Analyst]

I just want to come back on the comments you have made with regard to the [ Etrade ] and September versus Banque de France data. If I'm not wrong looking at the Banque de France data, the trend slowed in September by about 200 basis point. I just want to confirm is that what you've seen as well in your business? My second question would be with regard to the cost saving, you said that it's progressing along with the plan you've shared in H1 that what you felt was urgency for you was to invest in supers in France but also in hypers in Brazil. As you've been cashing in more cost savings, can you share with us what you felt was the most urgent thing to invest in, in Q3? And what kind of investment you have making thanks to the cost saving? My third question would be with regard to CapEx. So the CapEx budget has been cut quite materially. Just want to understand whether it's on one specific type of CapEx being maintenance, remodeling or expansion? Or whether it's quite across the board of all the different CapEx, would be my third question. And the last one, you've mentioned that the food e-commerce has been growing quite fast, 30% in the quarter. Can you maybe share what kind of absolute contribution you've had from food e-commerce during the quarter?

[Matthieu Malige, Chief Financial Officer]

Thank you very much, Maxime, for your questions. Well, in terms of the Banque de France data, I think we all have the same data. I'm not going to comment specifically on our performance on a month-by-month basis. Again, the message is, it's a strong quarter thanks to the market, but thanks to an improved performance of Carrefour versus historical market trends. Your second question relates to the price investments. As we -- as I said in my introduction, and as we wrote in the press release, we have continued to make commercial investments during Q3. As you know it's very commercially sensitive information. So we'd like to keep that as private and as long private as we can. So just to reassure you that we are continuing in our dynamics to improve our competitiveness. But understand, I will not comment on what geography, what magnitude, what timing. In terms of CapEx, the -- it's a global effort that we make to improve the selectivity and the productivity. It means that we have changed a little bit like we did and we do now on cost. We are more stringent on the spendings, on the projects, on the way we implement projects trying to share and put things in common among countries or among business units as much as we can. We challenge the cost of each project. We systematically now negotiate through auctions the budget for investments. This is done now by a dedicated and independent team that was created at the beginning of the year. So there is a strong methodology that is implemented at group level and shared inside the countries. So there is no one specific type of CapEx where our productivity efforts has been stronger than another. On food e-commerce, we don't share the absolute number. We were coming from one point, I think EUR 3 billion or EUR 4 billion when we disclosed the plan in January. We have the objective to get to EUR 5 billion of food e-commerce sales by 2022. And so we are growing this number rapidly and more than 30% in Q3 as you pointed.

[Maxime Mallet, Research Analyst]

If I may just come back on your first comment with regard to the trend and maybe the trade. I'm just asking with regard to, you had close to 300 basis points easier comps with -- for the like-for-like in France in Q3. And it seemed like you had a boost from some of that slowdown in September. As we move into Q4, are you going to have a 240 basis point [indiscernible] actually in France? I'm just trying to get a sense, do you think you can still maintain a positive like-for-like in France in Q4?

[Matthieu Malige, Chief Financial Officer]

I challenge the idea and the analysis that we had easier comps in France in Q3. This is probably built on an analysis over 2 years. You must please keep in mind that in 2016, we had advanced the anniversary to early September. And I think we shared last year that -- so last year, we came back to the standard timing for the anniversary. So I think that the -- 2017 is a fair basis for Q3. I don't think we had any easy comp.

[Operator]

Next question comes from Andrew Gwynn from Exane BNP.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Most of my questions have been covered. But I'm just wondering, firstly on Tencent, any news on what's happening there in terms of the financial element of the partnership? And then a few months in, I mean more as a year in almost for your tenure, certainly for Alexandre. And where do you think we should be measuring sort of financial success, and obviously because the cut in CapEx, which presumably will have quite a significant impact on the free cash flow of the group. We obviously talk a lot about EBIT and consensus EBIT, and obviously this is a trading update. But where do you think Carrefour's success story will probably best be identified from a financial perspective?

[Matthieu Malige, Chief Financial Officer]

Thank you, Andrew. On Tencent, your first question. There are really 2 aspects as you remember from the Tencent partnership. The first one relates to the operating aspect of the partnership with a number of areas which had been identified to work in common on data, traffic generation, improving the store experience, developing consumer credit. We have now after, well, 8 or 9 months, we've made substantial progress in creating more payment with WeChat pay. We have the facial recognition for payments in our store, Le Marche that we opened in May. We launched a mini app in WeChat environment recently. So we've made substantial progress. I think they contribute strongly to the very high development of our e-commerce business in China, which contributed to better like-for-like sales in Q3. The second aspect of the partnership is the capital discussion. Well, discussions are still ongoing, so it's premature for me to make any comments but the discussions are still ongoing. On your second question, which relates to what will be the success of Carrefour. I think we have identified as part of the plan a high number of areas where there was room to improve the operations of the group, and they are the main pillars of the plan. I think that the implementation of Carrefour 2022 will be a success, and the plan will be a success if we manage to change the commercial and value proposition to our customers so that they recognize that through the omnichannel proposition we can address their needs and their requirement for shoppings at the time through the format, the delivery option and the store size that they want, that they can find the right products at the right price in stores that has the right size and which is well adapted to the shopping area, that we have more proximity stores close to them so that they can use these stores as a relay for the omnichannel model. And that we be recognized as a true leader in the food transition, meaning that we play a role in the societies to contribute to addressing the food transition by very concrete actions. And in that sense, I think the Act for Food campaign has launched a very good dynamic. Or that should and up having customers prefer Carrefour versus competitors because they have a better value and commercial proposition at Carrefour than elsewhere. That's the aim of the plan.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

So I suppose in summary, you think this is a sort of growth type story rather than [indiscernible].

[Matthieu Malige, Chief Financial Officer]

Yes. It's a growth story, is how we can renovate the value proposition, the commercial proposition to the customers so that indeed they prefer shopping at Carrefour because there are good reasons to prefer shopping at Carrefour than elsewhere.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

And then just following on from that. I mean I suppose rightly or wrongly, the market obsesses about the French hypermarkets. When do you think that you can get those back into sustainably positive like-for-like?

[Matthieu Malige, Chief Financial Officer]

Well, I think it's hard to answer to that question. I think we are explaining all the actions, all the initiatives that we are putting into the hypermarkets in general and the French hypermarkets in particular. I pointed in my introduction that as far as food is concerned, and food is clearly a priority, the like-for-like food growth in the French hypers is at its highest level since 2015. That's positive news.

[Operator]

The next question comes from Sreedhar Mahamkali from Macquarie.

[Sreedhar Mahamkali, Analyst]

Yes, just 3 questions and 1 quick follow-up on what you just said, Matthieu. Is there a number you can share with us on the food like-for-like, first of all, please? The one that you referred to since 2015, the best growth?

[Matthieu Malige, Chief Financial Officer]

No, we don't disclose food and nonfood like-for-like. I'm just sharing so you understand the dynamics. They have been, particularly in Europe, I'd say, difficult nonfood markets, notably around the back-to-school period. And so when we post 0% like-for-like in the hypermarkets in France over the quarter, it means that we have positive like-for-like in food at a level which is quite high when you look at the historical numbers. We don't give a precise number, but it's a good news.

[Sreedhar Mahamkali, Analyst]

Okay. Perfect. So my three questions. First one is, can you give us an updated view, if you have one on the expectations -- your expectations with regard to resale law threshold, where we are on it? And the second one is I think around the first half results time, your expectation was that the French contribution towards the cost savings will step up in the second half. And now we've also got a fairly slightly better commercial dynamic as well. So that expectation, is that playing out as you see it in terms of a step-up in contribution from France? That's the second question. And the last one is can you give us any progress report on what you've achieved so far with Google and Sapient after 9 months? And what your expectations are over the next 3 to 6 months or certainly by the end of this year? If you can just lay out what your thoughts there are, that'll be helpful.

[Matthieu Malige, Chief Financial Officer]

Yes. Thank you very much. So on your first question, which relates, just to make sure I understand it well, to the new law with the minimum selling price in France. So there's been regulatory progress in the course of the past weeks, as the law was voted at the beginning of October. It means that it's now quite likely -- we're still expecting a high number of decrease, but it's likely now that the main items that we discussed as far as the impact to retail, which includes the minimum 10% gross margin on every single food item, the maximum discount at 34%, and total promotions representing less than 25% of sales. I think these 3 elements are going to go through. Now to evaluate precisely the impact, it's unfortunately too early. There's still, as I said, the number of decrees important, including on when the law will apply. They are still being discussed, so we're still expecting it to appreciate fully what could be the impact of this new law. As far as the...

[Sreedhar Mahamkali, Analyst]

But if I can -- quick follow-up. I mean, you presumably start supply negotiations in the next few weeks. What is the latest that this law can come in by to still be able to be relevant to conclude those negotiations?

[Matthieu Malige, Chief Financial Officer]

Well, we think it will be a part of the negotiations that there's still uncertainty as to the precise date. But it will clearly be part of the negotiations. Your second question relating to the French recurring operating income. As you pointed, in H1, we decided to anticipate on the investments in prices. We also had a competitive market. And in parallel to that, a number of cost initiatives were -- came later in France that they came at group level because a number of initiatives take longer to materialize in France than in other geographies. As far as H2 is concerned, I think this will remain true, we have continued our price investments in France. And our cost dynamics keeps ramping up. But the initiatives, many relate to the social plans and to the sourcing alliances. And so as far as the social plans are concerned, although they have now been closed, people will stay for a few more months until the end of the year, and they will actually leave the company and the payroll by year-end. So we'll have most of the savings, maybe just marginal savings, but not more than what I anticipated at the end of July, a few savings on the last months of H2. And as far as the sourcing alliances with Tesco and with Système U are concerned, well, we've made good progress there. We've gone through antitrust. The teams are now operationally working to prepare the negotiations. But the benefits will come in, in 2019. So indeed there is more volume in Q3. Well, I think it's fair to anticipate that there will be a decline in recurring operating income in France in H2 versus H2 last year. Your third question relates to the Sapient and Google partnerships. They are at different stage of progress. As far as Sapient, this one started to be operational very early in the Europe. As you know, the main deliverable is the carrefour.fr, new website. There's been substantial progress and accomplishments made by the joint teams. As I said in my introduction, the site will be live at the end of the year as we had planned. So things are progressing smoothly there. As far as Google is concerned, it's more early stage. There are -- I remind you that there are 3 aspect in the partnerships. The first one relates to the launch of a e-commerce food offering in Europe, which will take place at the beginning of next year, and we will be part of that first launch. So that the timing is next year. The second aspect of the partnership is the digital lab that we are currently implementing with a number of artificial intelligence and data scientists coming from Carrefour and from Google in order to develop functionalities relating to customers service and customers relationship. So that is progressing as we speak. And the last point is about digitalizing Carrefour with new tools and specific training on digital. And this is undergoing as we speak.

[Operator]

The next question comes from Nick Coulter from Citi.

[Nick Coulter, Director]

Just one, if I may. Is there a way to get some sense of quantum for the drag represented by nonfood in France? Or is there a market statistic that you can refer to, to give us some help in this area?

[Matthieu Malige, Chief Financial Officer]

Well, it's difficult. I think we'll have the same market data as far as nonfood is concerned. Again, there's been a number of weather aspect around the end of August and September in Europe, which has been particularly warm, and which is an important period in terms of nonfood because it's around the back-to-school campaign. So markets have been softer. And as we commented earlier, even negative in France at that period of the year. So hard to comment on a more precise number.

[Nick Coulter, Director]

But is it low single-digit down, mid-single digit down, just give us some framework of quantum because, obviously, we're all trying to understand the very important trajectory in your underlying food and your underlying food volume. Just try to give us a handle on that, unless you feel it's commercially sensitive so you wouldn't want to disclose.

[Matthieu Malige, Chief Financial Officer]

Well, it's indeed a sensitive aspect. I think that the main message for tonight is that the hypermarkets are at 0 like-for-like in France and that there has been a good traction from the food side on the course of the quarter. Again, thanks to a good performance of Carrefour, but also on the back of better market trends. So I think now we need to follow up on the following quarters as to how this develops.Well, thank you very much, everyone, for attending the call and for your questions. And I wish you a nice evening. Bye-bye.

[Operator]

Ladies and gentlemen, this conclude the conference call. Thank you all for your participation. You may now disconnect.