Carrefour Shelves Spinoff
Due to Market Woes

In a sign of just how quickly global markets have turned, Carrefour SA shelved plans to spin off its real estate into a public company.

Carrefour's change of heart indicates that retailers' interest in capitalizing on the value of their real estate -- a popular idea in the first half of last year -- may be waning because of economic and credit-market woes. Carrefour in August announced plans to create a pan-European real-estate company, Carrefour Property, that would own 60% of its real-estate holdings and be valued at between €20 billion and €24 billion ($29 billion to $35 billion). The plan, which Carrefour devised under pressure from investors, was to raise cash by selling part of Carrefour Property.

"Today, the market conditions don't allow it," Chief Financial Officer Eric Reiss said in a conference call yesterday. Carrefour is the world's second-biggest retailer by sales, behind Wal-Mart Stores Inc.

Also yesterday, the Paris retailer posted strong fourth-quarter sales growth, contradicting fears of consumer caution. Europe's largest retailer, which operates 12,500 stores in 30 countries, said sales rose 10% to €25.57 billion from the year-earlier quarter. For the full year, Carrefour's sales rose 7% to €92.27 billion. The company didn't report profit; it reports its yearly earnings in March.

Carrefour's change of plans raises the question of whether other European retailers will halt plans to make more use of their land and buildings. The company said it still wants to turn its property portfolio into a tool to raise holder value, but is studying other ways -- which it didn't specify -- to court outside investment in its real-estate holdings. Industry observers also have predicted a more-active real-estate strategy at Metro AG, Germany's largest retailer. Metro's recently appointed chief executive, Eckhard Cordes, has said he will increase shareholder value.

Carrefour extracted some good news from France, where the retailer has suffered from price wars. Carrefour said French food prices started to rise in the fourth quarter, while shoppers embraced changes at its French hypermarkets, one of four store formats Carrefour operates. French same-store supermarket sales, a measure at stores open at least a year, rose 7.2% in the quarter -- fastest since 2000.

Carrefour Chief Executive José Luis Duran said retailers will face uncertainty in the months to come, but said he was confident Carrefour was well-prepared to weather a possible downturn. A company spokeswoman said executives weren't available for further comment.

Carrefour posted results after the close of regular trading. Carrefour's shares fell 64 European cents, or about 1.4%, to €46.07 in Paris. Since the start of the year its shares have fallen about 12%.

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