Carrefour SA

PAR:CA

Earnings Call Transcript 2019-Q4

[Operator]

Ladies and gentlemen, welcome to the Carrefour conference call. I'll now hand over to Mr. Alex Bompard, Chairman and CEO. Sir, please go ahead.

[Alexandre Bompard, Chairman & CEO]

Good evening, everyone. It's not too late to wish you a very happy New Year. I am here today with Matthieu Malige, who will detail our financials for the fourth quarter of 2019 very shortly. But first, let me start by sharing my take on where Carrefour stands today, 2 years into our 5-year transformation plan. It's been a very intense time. But what the difference 2 years make. Of course, there's still work to do, but Carrefour's transformation is already well underway. We are proud of what has already been achieved, and we are confident that Carrefour is solidly on track for further profitable growth. Two years ago, the situation was very different. Let's take a look back for a minute. In January 2018, when presenting our strategic plan, I shared with you a clear picture. We were significantly falling behind the competition on key topics. On pricing, we were very far behind market leaders and losing ground in each key area. On customer experience, our satisfaction rates were unacceptable. On digital strategy, we were a laggard with IT systems that were not equipped for growing markets. E-commerce was not a priority. One example, we only had a 10% market share in the Drive market in France compared to 20% in stores. On commercial offer, we had stopped innovating and adapting to changing consumer needs. We thought we knew our clients, but we didn't. We also missed some of the major trends in the sector and where isolated wide average were forming partnerships and alliances. Our organization, our size was no longer a strength. Headquarters that were far too bulky. Decision-making processes that were too slow, lack of coordination. We couldn't take advantage of the diversity of our formats and geographies, and our costs were too high. The obvious consequences of this was a deterioration of our financial performance, with like-for-like sales in most formats and countries and a very sharp decrease in recurring operating income. Since January 2019, the transformation dynamic has taken us across the group. No stone was left unturned. Every country, every business line, every process was involved. To re-energize the group, we entirely changed our mindset, [indiscernible] behaviors on website. We put a new team in place with younger, more diversified talents with digital skills. We also aligned remuneration with performance objectives and shareholder interests. We open up to working with third parties. We walk away from isolation and signed alliances with Système in France and Tesco in [ Groups ]. And we committed to a purpose that is customer centric above all, being the leader in the food transition for all.This put us in marching order to propel the group forward. First, we implemented price investments in all geographies. We boosted loyalty programs and they [indiscernible] while reducing promotional intensity. Rather than leasing initiatives we undertook across all our geographies, I just add that we are continuing our price investments. A few days ago, we launched a new loyalty program in our supermarkets in France. Second, we led a digital revolution, platforms, supply chain, distribution services. We invested massively to catch up with the competition. We became the second player in drives and the leader in pedestrian Drives in France. We partnered with best-in-class companies from large tech groups like Google to innovative startups like [indiscernible], Glovo, Ewally, Dejbox and Potager City, which we recently acquired. As a result, we increased food e-commerce by more than 30 percentage share over the past 2 years. Third, we transformed our offer on innovative in our format to meet customer expectations on our offer. Through our action-oriented Act for Food campaign, we became known for healthy and responsible food shopping. Our achievements in the organic market showcase how we became a leader. We developed our own organic assortment with strict standards on more than 1,000 SKUs. We built a complete offer through our [indiscernible] experience corners and acquisitions, So.bio, Greenweez, Planeta Huerto and [indiscernible]. As a result, we posted more than 25% growth per year over the past 2 years. At the same time, we pushed our Carrefour branded product offer. We are well on track for our private label to account for 1/3 of our sales. In 2019, its share in French sales increased by 2 percentage points. On our format, we have become innovative again across all formats and have adopted a test and learn approach, notably in discounts on ready-to-eat food. We hired specialists and experts to guide us. We boosted our growth formats with over 1,000 convenience store openings and [ relatively ] revamped our in-store commercial proposition in our supermarkets. Our store network is not only bigger, but commercially successful. Our franchisees joined our banner, notably in France and in Italy, where we signed an agreement with 2 master franchises, representing more than 4 -- 540 stores. We also gained strong momentum in cash & carry in Brazil, where we have opened 14 new Atacadão stores since the launch of the plan. I now turn to hypermarkets. We've recorded a marked improvement of the performance of this format in a number of key geographies. In France, where our hypermarkets started very fine behind the back, we are tackling the sizable transformation that is needed. In addition to price investments and private label developments that I've already mentioned, we exited certain nonfood product categories and continue to reduce unproductive nonfood sales areas. These necessary reforms have a mechanical negative impact on sales. But they build a more sustainable and profitable growth model, and we are seeing the first encouraging signs of improved customer satisfaction. Fourth, our transformation set new standards for reorganization and strict cost discipline. Transformation means making difficult decisions, and we did. We merged the group headquarters with those of Carrefour France in Merci. We completed voluntary departure plan in France, Argentina, Belgium, Italy. We significantly reduced our costs. We meet our 2020 target, which was even revised upwards to EUR 2.6 billion, and we have identified [ outlook ] further for the rest of the plan. What's more? Cost discipline is now part of our DNA. We changed the way we manage our investments with a strict and selective framework. Lastly, we put an end to structural loss makers. In France, we exited unprofitable ex-Dia stores. More recently, we found a value for [ e-commerce ]. In China, we boosted our assets, thanks to the quick implementation of our plan, found a partner and struck a favorable deal for Carrefour. As you can see, we have progressed at full speed. Where do we stand now? We have accomplished a lot, even more than I thought possible 2 years ago and led solid foundations. First, we have reached key milestones on all our priorities. We are back in the game on price competitiveness, we are satisfying legal in Latin America and Spain. We are a leader in food e-commerce, outperforming the market in more geographies and notably in France, where our growth is close to 4x that of the market. We are a real multi-format player. We are innovating and expanding, and we are an attractive partner. We are widely recognized as the leader of the food transition for all. Sales growth for Carrefour branded products in France is more than 3x higher than that of the private label label markets. On organic, it's yet another segment in which we are outperforming the market in our key geographies. Another tangible output, customer satisfaction is consistently improving in all geographies and formats. NPS gained 8 points across the group since the announce of the plan. Second, the success in our strategic initiatives puts many of our business units in a winning and value-creating position. A number of countries which were in a challenging position 2 years ago have made significant progress in competitiveness, both in price and non-price and their sales and profits are now growing. This applies to Brazil, both at Carrefour and Atacadão. It also applies to Spain, Argentina, Poland, Romania, Taiwan and, of course, proximity in France. These business units are clearly in a winning position. This is a strong achievement. The rest of the group, including franchise markets, Belgium and Italy, are still in catch-up mode but many actions are underway. A lot of progress has already been made, but given the weak starting point, 2 years ago, more time on investment is required for this business unit to reach a winning position. This is where we will focus our energy over the next years. Lastly, let's look at our overall financial picture. In 2 years, we reversed the negative trends that preceded the launch of our transformation plan and our resumed growth. Our like-for-like sales growth has increased to 3.1% in 2019 from 1.6% in 2017. And our recurring operating income, which was sharply declining by nearly EUR 400 million in 2017, is expected to show a significant growth of EUR 140 million in 2019. France is expected to contribute strongly as its 2019 recurring operating income is expected to grow by double digits. Consequently, our economic and financial model is back under control. Our balance sheet has been greatly strengthened, thanks to stronger operating cash flow and successful asset disposals. It is one of the strongest in the industry. We announced Carrefour 2022 to regain the market-leading status that the group had been losing over the last decade. In such a large group, the transformation plan is complex and takes time. We still have a lot to do. But 2 years into our 5-year plan, we can already say that Carrefour is a very different company. We have come a long way. We have built a very solid foundation for the rest of the plan. We are on track. We are moving forward. We know exactly what we have to do. And we are confident that we will continue to deliver results in the coming years. We will meet again on February 27 for our full year results, and we also intend to provide you this year with a detailed view of major advances in different areas with deep dives on key topics. Our Investor Relations team will inform you in due time of our plans for 2020, which will include thematic events and meetings. Thank you very much for your attention. And let me now hand over to Matthieu Malige.

[Matthieu Malige, Chief Financial Officer]

Thank you, Alexandre. Good evening to all of you. It is my turn to wish all of you all the best for this new year. Overall, 2019 was a year of profitable growth for Carrefour, demonstrating the relevance of the Carrefour 2022 transformation plan and the strong momentum underway throughout the group. All of the progress described by Alexandre is making its way through to our numbers as reflected in the good Q4 and full year performance. Let me highlight the key messages of this publication. First, Carrefour posted another quarter of like-for-like sales growth. In Q4, the group's like-for-like sales grew by 3.1% driven by another quarter of like-for-like growth in Spain and accelerating growth in Latin America. Carrefour's performance was particularly strong in Brazil across all formats. Sales in France slightly decreased by minus 0.9% like-for-like. This reflects a subdued consumption environment marked by strikes and a negative FMCG market in Q4. Nevertheless, our focus on food, translated into positive food sales growth of 0.4%. Second point. Carrefour saw accelerating growth in the full year, with like-for-like sales also up by 3.1% versus 1.8% in 2018. Carrefour made strong progress in all strategic priorities. Organic posted growth above 25% last year. Food e-commerce grew above 30%. Sales penetration of Carrefour branded products was up 2 points in France. Cash & carry and convenience posted solid like-for-like trends in all geographies. Third point, this robust top line performance combined once again with a strong attention to costs translated into improving profitability in the full year. The definitive figure will be available next month, but we estimate that our recurring operating income will stand close to EUR 2,090,000,000. This represents an increase of approximately EUR 145 million or 7% at constant exchange rates versus 2018 comparable figures. France recurring operating income is also expected to improve significantly and show double-digit growth. After this overview, let's now look in detail at our Q4 and full year numbers. Let's start on Page 9 of the presentation available on our website. Total Q4 sales reached EUR 21.7 billion prior to the IAS 29 accounting standard. At constant exchange rates, they were up 2.5%. Note that the quarter was impacted by an unfavorable currency impact of minus 2.4%. On a like-for-like basis, sales rose 3.1%. This performance has been achieved in markets that remain very competitive and amid a complex political, social and macroeconomic environment in a number of our geographies. Let's turn now to our full year performance. Total sales stood at EUR 80.7 billion, representing 2.1% growth at constant exchange rates. The ForEx impact was also strong in the full year at minus 2.4%. On a like-for-like basis, our growth accelerated to 3.1% from 1.8% in 2018. This is Carrefour's strongest full year like-for-like performance since 2016. This solid top line performance, combined with cost savings translated into significant growth in recurring operating income, as I shared with you. This marks an interesting reversal in trends. You remember that in 2017, the group recurring operating income was declining by approximately EUR 400 million at constant exchange rates. Carrefour's improvement in profitability reflects the multiple initiatives undertaken by the group. While some of these might have a deflationary impact on sales, they have a positive impact on profitability. France recurring operating income is also expected to improve significantly and show double-digit growth. Let's now take a look at the Q4 sales performance by geography, starting with France on Page 12. Q4 sales in France were down minus 0.9% on a like-for-like basis. Food sales were up 0.4% like-for-like, while nonfood sales were down 7.7%. There are a number of factors that are worth having in mind when looking at these Q4 numbers. First, the FMCG market declined in Q4 in France as a consequence of the strikes against pension reforms. The mood in France at the end of the year did not favor consumption. This was reinforced by the negative impact of the EGALIM law, which prevented big promotions on safety products that are traditionally highly promotional at the end of the year. Then we carried out a number of commercial investments and strategic decisions during the year. They had an effect on our Q4 numbers, which includes the 500 unbeatable prices, which were launched in June, the development of Carrefour branded products with a 2 point [indiscernible] in sales penetration and the reduction of underproductive nonfood sales area and discontinuation of some nonfood categories. These commercial investments and decisions have a short-term mechanical negative impact on reported sales, but they are key to restore competitiveness and lay the foundations of a sustainable growth model. In this context, hypermarkets were down minus 3.4% like-for-like. Supermarkets posted solid like-for-like growth of plus 2.2%. This is a good performance as promotional intensity was reduced in Q4 and the weight of Carrefour branded products increased. Convenience also grew to 3.2%, showing good momentum. Turning now to Europe. Sales in the region were up 0.7% like-for-like. This represents another sequential improvement and the best like-for-like growth since the launch of the Carrefour [ 2022 ] [indiscernible] plan. The main highlight of the period is the confirmation that Spain is back on track and recent initiatives are clearly bearing fruit. Like-for-like sales grew 1.2% in Spain. Customer satisfaction is at the heart of the transformation and customers feel it. Carrefour recorded about 1 million additional tickets in the period. This dynamic is strong across all formats. In Italy, sales were down minus 2.2% like-for-like. Carrefour posted a resilient performance versus Q3 in a market that remains competitive and is decreasing in Q4. Sales were impacted by the sales area reduction and our campaigns with lower prices on 5,000 SKUs since September. In Belgium, sales were down minus 1.1% like-for-like. Carrefour was impacted by difficult market conditions and the decision to lower 1,000 FMCG prices in November. The food transition initiatives showed good results in organic, local and Carrefour branded products. In Poland, like-for-like growth reached 4.7%, confirming the attractiveness of the commercial model and the relevance of initiatives geared to customer satisfaction. Romania showed another quarter of like-for-like growth at plus 4.5%. LatAm remains a growth engine for Carrefour. Sales in the region were up by a very strong plus 15.1%. In Brazil, Q4 sales were at 11.5% at constant exchange rates. Like-for-like sales grew by 7.6%. This 12.7% like-for-like growth, Carrefour retail recorded its best quarter in the past 5 years. This notably reflects the successful price initiatives in hypermarkets, strong momentum at convenience stores as well as solid growth of both nonfood and e-commerce. Atacadão’s Q4 sales were up 10.8% at constant exchange rates, of which it was 6% contribution from openings. Atacadão opened 20 new stores in 2019, of which 8 in Q4. Like-for-like growth accelerated to 5.5%, confirming the strength of the model. Financial services continued to be supported by the operation to weigh the monthly card fee for all its users. The increase in billings was a remarkable plus 28.9% in Q4. In Argentina, sales were up 57.4% like-for-like with growing traffic and volumes. Carrefour took advantage of its reference positioning in price competitiveness to gain more customers. Let me conclude with geographic overview with Taiwan, which posted another quarter of like-for-like sales growth at plus 1.3%. Total sales grew by 5% at constant exchange rates and opening at a 3.7% effect, notably with the integration of 8 Taisuco stores this year, including 5 in Q4. In conclusion, our performance in the fourth quarter and the full year clearly showed that the Carrefour 2022 initiatives are delivering visible and convincing results. Our strong focus on customers is reflected in improving customer satisfaction, sales strength and profitability. We have confidence in our transformation for 2020. We confirm all our objectives. I thank you for your attention, and we are now ready to take your questions.

[Operator]

[Operator Instructions] We have one first question from Mr. Cedric Lecasble from MainFirst.

[Cedric Lecasble, Research Analyst]

I have 3 questions, if I may. The first one on French hypermarkets. Can you help us elaborate a little bit in understanding what derives from yourself negative measures like focusing on private label versus international brand, cutting some nonfood items, price investments. And maybe give us a little more granularity on the volume situation. What kind of elasticity do you get from price investments? I have the same kind of questions for Italy and Belgium. What still needs to be done in terms of commercial initiatives? That's the second question. What's the volume picture here? Also, what's the impact of your price investments? And the third question is on your earnings profile versus your remaining challenges. How do you monitor top line and profitability in the challenging areas in terms of speed, in particular? And what speed of improvement should we hope for or be looking for in 2020?

[Alexandre Bompard, Chairman & CEO]

Thank you, Cedric, for the question. I will answer immediately on hypermarket. But if you authorize me, I would like to make sure just initial confidence before. Carrefour France is not Carrefour [ Group ]. We have many other countries. And as you've seen and as we have described before, in these countries, I mean, the huge majority of these countries, we have been capable to improve situation. We were in a challenging position, and we have now profits and sales growing, and it is the case in very important geographies. Of course, Brazil, of course, Spain, of course, Argentina, Poland, Romania, Taiwan. And it's very important because these countries are key for growth, they are key for profitability also. The second thing I would like to tell you is that hypermarkets in France is not Carrefour France. 6 Carrefour France is composed with other formats. We have growth in a very important formats, which is proximity. We are leading the game. I'm sure you are capable to measure that our performance is stronger than our competitors on proximity stores. Same thing for supermarkets. We were lagging behind the game. We were not at the good level. We have worked a lot. We have invested in price. We have changed the format. We have tried to modify the offers, and we have good results this quarter again. Same thing also for e-commerce, on food. The pace of growth for e-commerce in France in food is 4x faster than the market. So I think it's very important to have that in mind, sorry, to begin with that. And now let's come to hypermarket in France. Hypermarket in France is a lot, it's more than 20% of our revenues. But it is only more than 20% of our revenues. It's not more than that. It doesn't mean that it's not important. It's really important, and we are very focused on that. So to answer your question about what has happened in the Q4, of course, there have been 2 main factors which account for our performance. First, as you probably already saw in panelists' report, the French FMCG market decreased in Q4, especially in December, in spite of low comparable due to the yellow vest movement. French has been impacted by strikes in relation to the pension reform. Consumers were not in the consumption mood with the strikes and the impact of the new law implemented in February was particularly March and December on effective products such as champagne, salmon, soda and so on. That's the first -- that's the first explanation for the performance. The second explanation for the performance comes from the necessary measures that we have decided to implement to increase our competitiveness. And of course, we know that there are consequences on the like-for-like, the positive consequences on the profitability. This includes, of course, the revamping of our commercial policy. On our price competitiveness, we invest in permanent price, as you know, on loyalty, while reducing promotional intensity. These impacts negatively our like-for-like. Second thing, on our commercial policy, we are continuing to reduce unproductive nonfood sales areas, ending certain nonfood categories, like jewelry, developing private label with price, as Matthieu said, is lower than national brand. So that is the 2 phenomenon that account for the performance of the Q4 hypermarkets. In Belgium and Italy, so the first phenomenon of FMCG market declining because of strikes and EGA was not existing. But as you know, the market has been very difficult in these 2 geographies, even if the competition and the different players are, of course, absolutely different. But the second part of my explanation about what we are doing is the same. We work, as you know, in all our geographies in the same direction to revamp our commercial policy and the price competitiveness with the same routes. And on the revamping of the hypermarket on the commercial policy, the increase of the weight of private brand, the reduction of unproductive sales areas, and we developed the same policy, and it has, of course, the same negative impact on like-for-like for the moment, but positive impact on the profitability of the format. Matthieu, on the third question?

[Matthieu Malige, Chief Financial Officer]

On your third question, Cedric, relating to the mix between top line and profitability, I think, we're very clear on how we want to implement this plan. Carrefour 2022 is a growth plan. We are investing on the price and nonprice competitiveness of our formats in all our countries in order to build a sustainable growth model. And it is paying off and it does translate into the acceleration of like-for-like that you see in 2019 versus 2018. In parallel to these very intense commercial investments, we have strong cost savings dynamics, which is in place and which fuels the -- all these investments. So it's really a volume-driven model that we want to reach. This model, as Alexandre said, is in place now. It's an outcome of 2019 results. This model is now in place in a number of geographies. So we're going to be able to focus our attention, our energies on a number of other countries where more work need to be done. I think the key metrics at this point of investments, of strong investments in price, I really measure that with the events in Q4, it's maybe difficult to read the underlying performance and to pay attention to the market share in volumes, you've -- in that respect seen a number of comments for various -- from various institutions saying that we have a number of [ business needs ] on that front in France and a number of [ business needs ] outside the France. So I think this is going in the right direction.

[Cedric Lecasble, Research Analyst]

Matthieu, that was precisely what I -- maybe I wasn't very clear, but I think your top line, the reported numbers are probably more negative than the volume situation and what's going on, the underlying trend. And actually, the question asked on volumes was to be able to put that in the context of the price investments. I perfectly understand the impact of the investments and the commercial investments. And probably in France, your volume situation is better than your overall sales situation. That's what I was implying.

[Matthieu Malige, Chief Financial Officer]

Yes, I think that's a good comment. I think it's completely true, given the magnitude of the investments, which have been implemented in 2019. So that's our numbers. I think even more importantly is how this compares to competitors. And it's very interesting, and I'm sure all the analysts and observers on the call have had good attention of that, that we have more positive comments on the market share in volume terms over recent period in France.

[Operator]

Next question is from Mr. Xavier Le Mene from Bank of America.

[Xavier Le Mené]

If I may first, kind of a detailed one. But just on the consensus. So the EUR 2,090,000,000 you said is post -- I believe, is post IFRS 16 and post IAS 29. Can you just quantify what is the IFRS 16 impact actually for 2019? That will be quite helpful, actually. Second one I'm back to actually the previous question from Cedric that is there any way for us to see what is the underlying performance actually in France through the hypermarket, especially. So you don't mention your kind of volume growth. But if you can't put a number on that, what is the kind of headwind you've got and how big it is. When should we expect that to turn around? When should we expect the headwinds to begun, and then for you to cycle all this negative impact?

[Alexandre Bompard, Chairman & CEO]

Thank you for the -- I'll take the second question. And of course, Matthieu will take the first. It's very clear that the quarter has been a difficult quarter for the format. It has been a difficult quarter for the FMCG industry. The consumption mood was not very festive. And as you know, the hypermarket is the format of festive moments now, of course. And of course, the situation in the Q4 of the hypermarket format overall was not very favorable. Nonetheless, in this particular context, due to strikes, due to the consequence of the EGA law under festive products, we have been capable to have a far better performance in terms of volume, of course, that in terms of value because of the magnitude of our price investments over the year. So the performance in volume is far more favorable than the performance of value. But of course, in the quarter, where the overall performance of the hypermarket in France was difficult.

[Matthieu Malige, Chief Financial Officer]

On your first question, Xavier, we actually anticipated a detailed list in our press release. So you got the right understanding, the EUR 2,090,000,000 published format numbers, so it includes IAS 29 for hyperinflation in Argentina and IFRS 16. You will see in the footnote on the first page of the press release that the expected recurring operating income ex IAS 29 and ex IFRS 16 is anticipated at EUR 2.080-ish billion, so a EUR 10 million difference. It seems that a number of analysts and observers were making their forecast on that accounting standard. So that's probably a more precise number to help you to benchmark versus your estimations.

[Operator]

Next question is from Mr. Mallet Maxime (sic) [ Maxime Mallet ] from Deutsche Bank.

[Maxime Mallet, Research Analyst]

I have 3 questions left. The first one is, at the end of H1 2019, you mentioned having achieved EUR 1.4 billion of cost savings out of the EUR 2.6 billion plan. And I was wondering if you could share with us how much additional cost savings you've achieved in H2 2019. The second one is with regard to one of your introduction remarks, which is you being back in the game in term of price competitiveness. If I'm looking at the variable data in a different way, I'm showing the price positioning of Carrefour drives versus competition. What it shows is there's been quite a material deterioration in your price positioning through 2019. That's explained by the fact that you've aligned more your store versus e-commerce prices. But still, it shows that the actual well positioning of those drives so closer to your hypers is the worst banner among hypermarkets, about 6% more expensive than Leclerc. And it's even more expensive than some of the supermarket [ spend-out ]. So I was wondering whether you have any data to share with us with regards to your positioning and the positioning that you are seeing versus where you were positioned maybe a year or 2 years ago for your stores. And the second one on that would be, if you are now fine with your price positioning and you think that's the right one or you're going to have to invest some more going forward. And my last question is with regard to Casino. We've been seeing that they've been divesting assets in the past few quarters -- years, notably Lyon and Leader Price. It seems like independent players and LDRs are the ones that are the most active on buying those assets. But I was wondering whether that's something you are considering and looking at notably or potentially acquiring some of Casino's assets or even more if you have the opportunity to strengthen your market shares or your positioning in some areas. That would be all for me.

[Matthieu Malige, Chief Financial Officer]

Thank you, Maxime, for your question. I'm going to take your first 2 questions. So as far as the cost savings are concerned, we will share with you on February 27 magnitude like we do each semester, the magnitude of the cost savings for H2 2019 for the full year and since the beginning of the plan. What we said in our speeches tonight is that we still have a solid dynamic and that we're satisfied. Alexandre said that it is now part of the DNA of the group. So all countries, all business units are working on their cost efficiency. And so we'll share the detail with you in just a few weeks. On the price competitiveness. I thought in the introduction of Alexandre, there's very different groups of countries which have been flagged. Again, it's been 2 years that we've been investing in the price and nonprice competitiveness in all our countries, in all our formats. We have a number of geographies which were starting not too far from the pack, not too far from competitors. And thanks to the improvement, these countries are now in a good price position. I think France, and notably hyper and super in France are not in that group. We consider that we've made substantial progress. I think that has been illustrated by some public indices. I have noted, we have in mind a linear index, which was published in full. And so strong progress, but still more to do on price competitiveness. More specifically on the index that you were mentioning. This index is based on Drive prices. As you rightly said in your question, we are converging our prices between Drive and the stores. As you saw in our top line numbers on e-commerce, the Drive proposition, the Drive service, the Drive offer has improved very significantly over the past 2 years, and it's easier and more consistent for customers to have aligned prices across formats. Now the way this index is built as the number of buyers. And we think it significantly disadvantages the vision that you have from Carrefour just to raise a few points. It does not include our loyalty reward, which is an angle on which we are investing very aggressively, as you know, it only covers national brands. As you know, we are making a number of assets on private labels. It focuses on Paris, which is where we have strong stores. So we are over weighted versus other players who are less present in the Paris area. So that's a little bit where we are. Again, significant improvements in the price positioning of all geographies, including France, but clearly, more work to do, and it started just a few weeks ago with a fresh cream on the market, supermarket format in France. On your last question, so I'm very pleased that you asked this question because it's improved also but you shared the fact that we can be very confident with the transformation momentum based on the results that we're already seeing and that we described today, which make us in a good position for the future. But as it is an easing of confidence, I will make a second confidence on this call. I'm sure it would be a good surprise. As a rule, I do not comment M&A speculation.

[Maxime Mallet, Research Analyst]

Understood. Thanks a lot. And if I just may, with regard to the cost savings, is it fair to assume that H2 accelerated the cost savings versus the previous semester even without having a precise figure.

[Matthieu Malige, Chief Financial Officer]

We'll give you details at the end of February [indiscernible] or another few weeks.

[Operator]

Next question is from Mr. Arnaud Joly from Societe Generale.

[Matthieu Malige, Chief Financial Officer]

We cannot hear you, Arnaud. Can you take another question if Arnaud had connection issues?

[Operator]

Yes. We have another question from Mr...

[Arnaud Joly, Equity Analyst]

Can you -- can you hear me?

[Matthieu Malige, Chief Financial Officer]

Yes, Arnaud, we can hear you, please.

[Arnaud Joly, Equity Analyst]

Okay. Sorry.

[Matthieu Malige, Chief Financial Officer]

Go ahead with your question.

[Arnaud Joly, Equity Analyst]

So I have 2 questions. The first one, did you improve the EBIT contribution from French hypermarkets in '19. Just some flavor, I don't need, of course, precise figure. And the second question on France as well. Can you make an update on your new concept in France, Supeco on the one hand and [indiscernible] on next on the other hand, for hypermarkets? And in particular for next, I know the first trial was opened very recently. But if you can give some flavor on the first results.

[Matthieu Malige, Chief Financial Officer]

On your first one, just quickly, Arnaud, we don't give it -- our [indiscernible] operating income numbers format for France. And we don't give the number for France today. So you need to be, again, patient a few more weeks, and we have more -- we have precise and final numbers in 5 weeks' time, and we'll be able to make some analysis on the French performance.

[Alexandre Bompard, Chairman & CEO]

Okay. On the second question around the transformation of the hypermarket. If you [ like to provide ] few words. At the end of January 2019, we presented a complete, comprehensive and ambitious project. Our strategy to renovate the hypermarket includes several [ benchmarks ]. First, improve the day-to-day customer experience. And it means for us, it does have many consequences to test some dedicated service areas, which bring together our customer service at the inference of the store and is very positive to invest in more self-scanning and more self-checkout, very positive to increase the number of hypermarkets open on Sunday, very positive. So first part. The second was to renovate the store commercial concept, and it was included mainly in the next concept. We roll out our organic food areas. And of course, it's very positive. We have successfully tested some new commercial areas, such as beauty [ and our Opex ]. We are modernizing our first section in a number of stores. And of course, particularly with the experience of next. We are developing in the same logic catering. We are rolling out more outlets as they have proven to be strong for future generation. That's the second part. The third is to adapt the product offering and pricing more specifically to their particular catchment areas on to the competition. Fourth was when the competition are made, stores may be switched to lease management contract. As you know, 8 stores were transferred since the beginning of the year. On 5, a more efficient and a more productive organization in the stores has been implemented leveraging on more initiatives given to local management, more [indiscernible] tasking on simpler organization. It's what we call the U.S. projects. So how do we do it? We test a lot -- a lot in a lot of places. There are some tests you never heard of. There is new one solution, a new hyper concept that will be successfully everywhere. We believe in adapting to each local catchment area. And what are the results? The test have post was very interesting, very positive, very successful information on many subjects. We are more satisfied, again, with the toolbox approach on the number of weeks that were tested this year. Clearly, some of them are being rolled out to the majority of the store when it's appropriate. We want to test our idea because it's a continuous momentum. And that's the logic. That's the way we organize this -- all these conferences in global transformation of the hypermarket. On the Supeco, I think so because we will leave that, as you know, to market. The concept has proven very successful in several countries, such as particularly, Romania, but also Spain. As far as France is concerned, it's a little bit too early to comment on the [ validate ]. We have just opened the first store in September 2019. We learned a lot. We have positive insights, and we want to continue to improve the commercial proposition, the organization, but many positive elements from that.

[Operator]

Next question is from Madam Fabienne Caron from Kepler.

[Fabienne Caron, Head of Food Retail Sector]

I've got 2 questions. The first one is on square meter in France. Can you tell us how many square meters you [ coach ] in France? And if I think it would be useful to all of us to have roughly an idea of the negative impact on like-for-like and the total number of square meters and the timing, which will help us to quantify the headwinds? The second question will be, I'll come back to Maxime's question on your price index. I agree with you the Duvet Index is not volume [ making ] national [ brand ]. I don't think there was a shift in the geography, however, over the month. So I think the analysis that Maxime did is invalid. I'm just wondering if the right way maybe or the right answer is just that Carrefour does not need or doesn't want to be well placed on 9,000 national brands because you choose your battle and you identified your 500 projects with the most volume, which matter more for consumers. So if it's the right way to look at it, if you take all in so private label, loyalty card, national brands with key volume items, what is your true price difference to your main competitors today? Is it 300, 400 basis point? Can you help us, please?

[Matthieu Malige, Chief Financial Officer]

Thank you, Fabienne, for your questions. Well, on the square meters, I think we have somewhere in the press release the number, I think it's 115,000, something like that. What we said earlier, it's really a movement that takes place in all geographies or you should see that somehow France should be half of that. It may vary from 1 year or 1 quarter to another depending on various projects, but it's really -- there's no reason why it should impact more or less France versus its weight inside the group, again, on the medium-term trend.

[Fabienne Caron, Head of Food Retail Sector]

[indiscernible] -- sorry Matthieu, [ but you said 50% ], [indiscernible] versus [ 400 ] something...

[Matthieu Malige, Chief Financial Officer]

Well, I think that is depending on quarters, I think that French have been between [ 14% ] and [ 15%], it may be in advance at some point in time, it may be a little, but the midpoint at 50%, I think, is...

[Fabienne Caron, Head of Food Retail Sector]

And it's [indiscernible] in 2022.

[Alexandre Bompard, Chairman & CEO]

Well, and across the plan, it's really a store by store, a transformation process. Again, all countries are progressing. So that's the ballpark estimate that you can make. Let me be clear on the prices. We are absolutely convinced that in France, we need to improve our competitiveness that we started too far from the back. We've made a number of investments. I'm not going to mention them again now on price and non-price items, which are important for our customers. We have narrowed, and we want to keep narrowing the gap or even taking advantages versus a number of our competitors. It doesn't mean that we want to be a price leader. It just means that we think our formats need to keep progressing on their journey to improving their positioning. So then you cannot see it in the index that Matthieu referred to because in parallel to these investments, we are converging to drive to the stores, and I'm sure you've understood that very well. So it's not very difficult. I'm sorry for that. But we shared with you all the investments. We shared with you a number of qualitative items. The NPS is improving in all geographies, including France. You also have external data, which show that the quality and the perception of customers is improving in France. And we talked a little earlier about the volume, it seems that our customers seem to have perceived that things are improving at Carrefour.

[Fabienne Caron, Head of Food Retail Sector]

Okay. But is the right reason to look at it, how to look at it? Is there -- should we say you've done half of the jobs that you still need to do? Or you've done 1/3, 2/3, you need to help us a bit more there in terms of prices.

[Alexandre Bompard, Chairman & CEO]

We're not going to help our competitors. So...

[Fabienne Caron, Head of Food Retail Sector]

But no, you actually said you've done half of the way. We say where you are going is fine.

[Alexandre Bompard, Chairman & CEO]

If I just [ hand ], Fabienne, you see the strong progress. It started very early in March 2018. We identified the supermarkets as a priority that was quite strong. I think in 2019 with the projects that don't increase with the [indiscernible], with the inevitable. It isn't progressed just a few weeks ago with the [indiscernible] in the supers. So I'm not going to tell you more. You understand why that is progressing.

[Operator]

Next question is from Mrs. Carole Madjo from Exane.

[Carole Gladys Madjo, Research Analyst]

Two questions for me. First of all, to come back on the EBIT guidance. Back in Q3, you mentioned being comfortable with EBIT consensus, which was about [ EUR 2.050 billion ]. And I talked about [ 2.08 ], [ 2.09 ]. So can you maybe explain what this improvement is coming from? And second question, when you talk about cost savings being part of your DNA. Should we assume that you will launch further cost savings initiative after 2020?

[Matthieu Malige, Chief Financial Officer]

So on the EBIT, again, it's [ we can ] share with you some of the numbers that we're expecting, please be patient for another few weeks, so we can make analysis of these numbers. On the cost savings, we have an objective when we set the plan. It's a 5-year plan, we have a number of 5-year horizon objective. We had a shorter-term objective of 3 years on cost savings because there was a sense of urgency, of emergency to put our cost and their control and get into a transformation process. That has started very well. Again, it's part of the DNA of the group. So I don't anticipate this movement of transformation, of efficiency to stop on December 31, 2020. So it will be an ongoing movement. What will be the magnitude, the horizon on beyond 2020 is not something that we're ready to share yet. But clearly, it's a profound movement and ongoing and continuous movement of cost-saving initiatives in all regions at Carrefour.

[Operator]

Next question is from Mr. [ Russell Lee ] from Bernstein.

[Unknown Analyst]

Two questions, if I may, please. Firstly, on France, can you give us an idea of what the different moving parts are behind that double-digit profit growth guidance? And I think in H1, it's about 9% growth. So can you help us understand what's driving that stronger profit growth in H2? And related to that, can I assume double digits mean between 10% and 15%. And my second question is, again, on the hypermarkets in France. How much of the minus 3.4% like-for-like would you attribute the strikes to this year? If I think back to last year, you had the impact of yellow vests, but is it fair to say that the strikes this year have had a bit -- have had a bigger impact on sales?

[Matthieu Malige, Chief Financial Officer]

On your first question, again, let's wait. I think it is important to give you an update of what we were expecting, let's wait until all the internal processes are finalized, so we can share with you in more detail in terms of analysis. So let's meet again on February 27 to share details for France. On price, on the consequence on hypermarket. So as I said, as we have said, there were 2 main consequences, of course, the transportation orders, but also the fact that the need for consumption was good in the celebration. It's very difficult for us, some, I guess, manage to do but we don't to precisely isolate the impact of the strikes. In reality, this would require answering into deductible on the assumptions, which is not our approach at all. So we decided not to provide any quantified evaluation of the impact. As you probably remember, we had the same approach last year with the yellow vest movement. And we had last year the same approach. And next year, we try to become [indiscernible] we have this approach again because we don't want to enter into this [indiscernible] assumptions.

[Alexandre Bompard, Chairman & CEO]

I think we have time for last question.

[Operator]

We have one last question from Mr. Nick Coulter from Citi.

[Nick Coulter, Director]

Just one quick one on clarification, please. Are you saying that you're holding your overall volume share in France in grocery for the quarter? And I guess, if that's the fact that are you winning volume share in supermarkets and convenience and losing volume share in hypermarkets, just to cut through all the noise that we have in this quarter.

[Alexandre Bompard, Chairman & CEO]

Well, we will not -- thank you for that. We're not communicating on volume and volume growth. I think you asked the question on previous [indiscernible]...

[Nick Coulter, Director]

I asked on share. So just on volume share, not growth, just volume share.

[Alexandre Bompard, Chairman & CEO]

So we are not ready to share that. Again, I think it should be looked in comparison with the market. This is why...

[Nick Coulter, Director]

But it is in comparison with the market if it's share. So it's a relative question.

[Alexandre Bompard, Chairman & CEO]

Yes, you've seen a number of comments from the market share institutes saying that on given periods, we weren't very stable or slightly negative on market share, which clearly showed that there was a gap between the revenue performance of market share and the volume performance of market share. I think it's included in their report. So I will refer you to these previous reports. But we view that as it was asked and I think answered in previous questions, there is slight gap unfavorable to volume in terms of market share trend given the magnitude of the price investments that we're putting into the business.

[Nick Coulter, Director]

So I'll take that you're still losing volume share but it's better than the value trend? Is that the assumption? Is that correct?

[Alexandre Bompard, Chairman & CEO]

I think, please go through the report, but I think we're heading in that direction. Thank you very much to all. That was our last question. We want to thank you for your presence. We'll meet again next month on February 27 when we produce our full year results. Have a great evening.

[Matthieu Malige, Chief Financial Officer]

Have a great evening. Thank you very much.

[Operator]

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