Major European retailers posted higher profits for 2007 on Thursday and predicted continued robust growth, but warned the global credit crisis and slowing economies could crimp consumer spending. Upbeat forecasts from Carrefour, Dutch Ahold and Belgium's Delhaize cheered investors and the DJ Stoxx retail index was up 1 percent by 1508 GMT.
Ahold and Delhaize have big operations in the United States where a weakening economy has led cash-strapped shoppers to hunt for bargains. The Dutch company is cutting prices as part of an overhaul of its US stores.
Wal-Mart Stores Inc posted a better-than-expected 2.6 percent rise in February revenue at US stores open at least a year, thanks to strong sales of groceries, medicines and electronics.
US warehouse club Costco Wholesale Corp reported higher quarterly profits on Wednesday, attracting shoppers hunting for bargains on food and fuel. World number two Carrefour said it expected faster sales growth this year to produce even faster profit growth after a 0.7 percent increase in 2007 underlying net profit to 1.87 billion euros ($2.86 billion).
"We are expecting sales growth of 6 to 8 percent, excluding acquisitions, and an increase in activity contribution (operating profit) faster than sales," said the Paris-based operator of supermarkets from Beijing to Brasilia. A drop in French consumer confidence to multi-year lows was starting to hit non-food sales in the eurozone's second-largest economy but this was largely offset by the rise in food sales, Carrefour Chief Executive Jose Luis Duran told analysts.
Ahold, which makes more than half its sales in the US and the rest in Europe, said market trends in the first eight weeks of the year were similar to last year but the group was on alert for any change, Chief Executive John Rishton told reporters.
The group set a 2008 target for underlying retail operating margin of 4.5-5.5 percent after delivering a 4.6 percent margin in 2007, above a targeted 4-4.5 percent.
"The outlook is very good," said ING analyst John David Roeg. Delhaize, which makes most of its sales in the US, said it started the year with healthy sales and that any change in consumer behaviour would affect sales but not margins.
Britain's John Lewis, seen as a bellwether for the UK retail sector due to the range of its products and for publishing weekly sales figures, sounded a more cautious note.
"We expect trading conditions to be very challenging this year as consumers continue to respond to concerns about the housing market, higher food and energy costs and tighter credit conditions," the department stores and Waitrose supermarkets operator said in a statement. Carrefour's Duran said the group's performance in Europe was helped by the return of "low single-digit food price inflation".
Ahold and Delhaize said they were passing on higher food prices to consumers, with the Dutch retailer saying it planned to negotiate with suppliers to keep costs down. Inflation that has lifted food prices to record highs is likely to continue until 2010, according to the United Nations' World Food Programme.
Carrefour said it aimed to return around 4.5 billion euros from asset sales to shareholders while speculation that Blue Capital, a joint venture between businessman Bernard Arnault and US property group Colony Capital, may raise its 9.1 percent stake boosted the shares by more than 4 percent.
Ahold, which topped analyst forecasts with a 9 percent rise in fourth-quarter net profit to 262 million euros ($398 million), powered by its domestic unit, said it will pay a dividend of 0.16 euros per share, its first since an accounting scandal in 2003.