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Carrefour CFO on crisis management

Matthieu Malige explains how a strong bond with the CEO of Europe's biggest retailer ensured a rapid response to the pandemic

When Matthieu Malige joined Carrefour as CFO in 2017, he could reasonably claim to be familiar with the workings of the French retail giant.

He had worked for what is one of the world’s largest retailers with 12,300 stores employing around 320,000 staff worldwide between 2003 and 2011, as CFO of its Belgian and then its French business – the largest national business delivering nearly half of the group’s revenues.

He also knew Carrefour’s CEO Alexandre Bompard well. The two had previously performed the same roles at French household goods firm Fnac Darty where they hatched a plan to adapt to digital disruption in the sector.

The relationship the pair have built has not only stood them in good stead for kickstarting a transformation programme at Carrefour, it has also proved vital for meeting the challenges thrown up by coronavirus.

“As the crisis developed, we needed to take a large number of quick decisions. Knowing each other well, having a very trustworthy relationship with each other allowed us to accelerate the process,” says Malige.

It ensured that the Carrefour leadership was able to take drastic action across the global business where vast supply chains were being put under pressure by the outbreak of the pandemic.

“We were used to rapid transformations and quick decision making processes. It helped us react efficiently in the crisis although no one can be fully prepared for a crisis of this magnitude,” says Malige.

“When the coronavirus crisis hit, the first objective was to maintain levels of service in the face of stockpiling. Lines of people in stores put pressure on our supply chain, so we had to adopt emergency procedures to speed up the decision-making process in order to make the supply chain more efficient.

“We also had to protect our employees and customers from the disease. That’s where we adapted, to find very quickly the protection equipment ,” he says.

Malige says another priority was ensuring the financial security of Carrefour to navigate through such an uncertain period. A decision was made to issue a €1bn bond at the end of March, which he led. “Finance was able to assist the company make sure that we could run effectively through a deep crisis,” says Malige.

Given the global reach of Carrefour, there was also a need to respond to the challenge of coronavirus that was impacting at different speeds around the world, by interpreting insights from data. “For example, the pandemic developed a little later in Latin America, with a three to four week lag,” says Malige, who is president of the Brazilian business, the second largest region for the group, representing nearly a fifth of turnover.

“So we’ve been in very close contact with our teams locally, so that they could benefit from all the experience that we were going through in Europe. We’ve been able to increase the supply of specific goods to anticipate stockpiling,” he says.

The result has been that although the supermarket giant’s share price slipped in the early days of the pandemic it has almost recovered to its pre-coronavirus level, giving it a market value of almost €12bn by mid-September.

Ongoing transformation

Before coronavirus impacted, Carrefour was on a programme to address global challenges faced by the group that had grown to become one of the world’s largest grocers- operating in 30 countries. “Prior to February 2020 we were implementing a deep transformation,” he says.

“Transforming and developing companies that are going through challenging times is really in my DNA, says Malige. At Fnac we successfully conducted a turnaround of a company threatened by the rise of ecommerce, undertook an IPO and managed the acquisition and integration of Darty in 2016,” he says.

After Bompard hired Malige at Carrefour, the know-how the pair had developed in transformation was set to work in 2018 rebooting the Carrefour business model, to capture value from new trends.

Top of the priority list was making Carrefour increasingly digital by enhancing the use of online retail with increasing use of home delivery, while at the same time focusing more on improving performance in stores, notably through the sale of more organic and healthy products, in line with group’s aim of being the leader in the food transition for all.

“Transformation means moving from a mainly brick and mortar business into an omni channel retailer that’s able to serve customers in all formats of stores, from very large hypermarkets to small smaller city centre convenience stores and an ecommerce platform,” says Malige.

“Stores may also become preparation hubs for online orders, or click and collect delivery points for online orders so the role of the stores changes with this omni channel approach.

“It is obvious that we need to grow and consume more organic products, and to produce food more locally in a more environmentally respectful way. Carrefour can play a key role in the food chain. By changing our policies we can positively impact the whole chain from production to distribution” he adds.

In order that Carrefour meets its targets of more responsible consumption, that extends for example to the treatment of farmers, the group has developed 17 key performance indicators (KPIs).

These are used to measure how well management is matching targets on a wide set of areas that include reducing food waste, reducing obesity and minimising CO2 emissions, staff diversity and inclusion,  to which incentive programmes are matched.

“We must go beyond nice intentions. It has to be very concrete actions that are measured, audited and reported to the Board and the community” says Malige, whose finance function takes a key role in setting and measuring the KPIs.

Through its business partnering role, finance also operates as a key conduit with the various business areas- informing them of the relationship between their operational initiatives, and the impact on KPIs.

“We then go one step further to explain how key decisions made in each business area translate into an impact on the overall economic model, in terms of the profit and loss (P&L) and cash flow generation,” says Malige.

In order to ensure Carrefour is effectively capturing as many insights from data,  the company has developed a relationship with tech giant Google. “We use their expertise on data. When it comes to big data, they bring a competitive edge” he says.

The fruits of their efforts have been that recurring operating income and turnover has stayed fairly consistent since their partnership started. Although recurring operating income has fallen below levels prior to Malige joining,  €2.08bn delivered for 2019 represented an improvement on the previous two years although sales of €80.7bn in the same year was off the peak of €88.2bn achieved in 2017.

Accelerating trends

One of the new certainties of coronavirus is that it has brought forward many of the dynamics that were already developing in retail and elsewhere. “Crises tend to accelerate trends, which were pre-existing,” says Malige.

Having overcome the initial jolt created by the pandemic, Carrefour is now moving to a strategy that combines the pre-coronavirus thinking with modelling that seeks to interpret a complex environment in the near future.

On a practical level, Carrefour will continue to invest heavily in robots, in order to  increase the speed of preparation of online orders, as the trend for online shopping and home delivery continues. “We saw a doubling of online activity just this last year, and in some specific weeks, it multiplied by four or five times.

“It’s a trend we’ve seen across our geographies. I don’t think we’ll go back to where we were as a large number of customers will probably keep using the service, after the crisis,” says Carrefour’s CFO.

He says the trend of implementing more local food production is likely to grow as a result of coronavirus, ensuring a number of partnerships with local farmers and producers will continue.

The increasingly diverse local challenges created by coronavirus, layered on top of growing disruption, has required a more dynamic approach to modelling and forecasting. “We have developed many more scenarios, which means the annual budgeting process is really over for us.

“We now make regular forecasts that we can frequently update. I think that’s another area where the CFO function has been so critical during the crisis,” says Malige.

This changing approach to forecasting along with a more dynamic business model are areas to be carefully communicated to the market, another key aspect of Malige’s role.

“It’s important to share with investors as much information as possible, to help them understand how the crisis is impacting our economic and financial model and how we are adapting in response,

“I think it has been very important that we have been having even more dialogue with our investors, through zoom and web conferences, so they can follow closely and adapt their analysis and investment decisions.

“It’s vital for them to be able to see not only that we were well prepared for the pandemic, but also that we are now able to capitalise on a number of opportunities, that are arising from this crisis,” says Malige.

One example of that opportunism is Carrefour’s push to make  a series of bolt-on acquisitions that Malige is taking the lead on, harnessing his investment banking experience at Lazard in his early career.

He has pursued acquisitions in recent weeks in Brazil, Taiwan and most recently in Spain, the group’s third largest region, where a tenth of the group’s business is based.

Malige says the strategy is a logical way to exploit a strong balance sheet and improving cash flow, compared to a year ago when M&A was very much off the agenda.

“We looked at possible acquisitions across several various geographies and decided to seize on them, to turn the crisis into a source of opportunity,” he adds.

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