Carrefour shares fall 14% after profit cut amid French unrest

Shares of Carrefour fell 14% on Wednesday after the French supermarket chain lowered its full-year profit outlook, citing an unprecedented deterioration in social and security conditions in France. The company disclosed the revised guidance in its third-quarter earnings report released late Tuesday, stating that consumption trends and operating conditions are facing significant headwinds.

In the statement accompanying the report, Carrefour noted that the worsening situation in France is directly impacting its business environment. The retailer revised its expectations for operating margin growth to a range of 0 to 15 basis points, a decrease from its prior forecast of a 25 basis point increase. Additionally, the company now projects adjusted earnings per share to remain flat or rise slightly, moving away from its earlier expectation of high-single-digit growth. Free cash flow is also forecast to decline slightly, reversing a previous prediction of modest expansion.

The downgrade comes amid widespread civil unrest across French cities, where hundreds of thousands of protesters have taken to the streets demanding increased public spending and expressing frustration over high living costs. While the majority of demonstrations have remained peaceful, incidents over the weekend included looting, vandalism of shops, arson at city halls, and attacks on police officers. Carrefour warned that this turmoil is disrupting store operations and weighing on consumer spending, which is already under pressure from rising energy costs ahead of the year-end shopping season.

Despite the sharp drop in trading, Carrefour shares remain up approximately 2.5% year-to-date, outperforming the French blue-chip CAC 40 index, which has declined nearly 4% over the same period. The CAC 40 itself rose 0.2% early Wednesday, buoyed by a surge in shares of eyewear maker EssilorLuxottica following its own strong third-quarter results.

In terms of quarterly performance, Carrefour reported like-for-like sales growth at constant exchange rates of 2.3%, which aligned with FactSet expectations and slightly exceeded growth rates seen in the first half of the year. France represents a significant portion of the company's revenue, accounting for 11.9 billion euros ($13.4 billion), or just over half of total revenues. Sales in France grew by 1.2% during the third quarter.