February 28, 2019 / 7:34 AM / 3 months ago

UPDATE 1-Retailer Carrefour raises cost savings goal under overhaul plan

* Operating profit 1.938 bln euros, vs 1.930 bln guidance

* 2018 cost cuts 1.050 bln euros, raises 2020 target

* Free cash flow 1.88 bln euros vs 950 mln in 2017 (Adds details and CFO comments)

By Dominique Vidalon

PARIS, Feb 28 (Reuters) - Carrefour said the execution of its turnaround plan was well on track and raised its savings goals, as Europe’s largest retailer delivered cost cuts of 1.05 billion euros ($1.2 billion) in 2018 and a higher free cash flow.

The French supermarket retailer reported a well-flagged 3.4 percent decline in 2018 operating profit, reflecting weakness in its core French market despite a robust performance in Brazil.

“For Carrefour, 2019 will be a year in which we will deepen the initiatives of the 2022 plan, to better serve our customers...Our encouraging results now allow us to revise upwards a number of 2022 targets,” said CEO Alexandre Bompard.

Carrefour is in the midst of a five-year plan launched one year ago to cut costs and jobs, boost E-commerce investment and seek a partnership in China with tech giant Tencent in an effort to lift profits and sales and tackle the growing competition from U.S. online retail giant Amazon

The plan entails expanding into convenience stores and having a greater focus on organic products and private-labels, with Carrefour having recently sealed a purchasing alliance with Tesco.

Carrefour kept its annual dividend unchanged at 0.46 euros and raised some of its targets under its “Carrefour 2022” plan.

It said it now eyed cost savings of 2.8 billion euros by 2020 instead of the 2 billion previously targeted.

Its 2018 recurring operating profit reached 1.938 billion euros, in line with the company’s own guidance for 1.930 billion provided in January.

In France, where CEO Bompard has made reviving flagging sales at hypermarket stores a priority, operating profit fell 43.3 percent to 466 million euros.

In France, Carrefour faces competition from the likes of Amazon and pressure from cheaper prices offered at rivals such as Leclerc.

The group’s Chinese operations slightly remained loss-making last year amid fierce competition from local players and a buoyant online market but Carrefour said its general performance was nevertheless improving in China.

Carrefour has announced a potential deal with Tencent and local retailer Yonghui to take a stake in Carrefour China. Finance chief Matthieu Malige said talks were continuing.

Carrefour shares have gained 18.4 so far this year, slightly outperforming their European sector, but are still down 18 percent since Bompard joined in July 2017.

$1 = 0.8793 euros Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta

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