As recession fears grip the stock market and squeeze consumers, outperforming fund manager Sean Peche is betting on an unexpected retail player: French multinational Carrefour. Peche, a portfolio manager at Ranmore Fund Management, highlighted the company’s defensive nature and ability to grow profitably amid inflation as a key attractive quality. The stock, which also trades in the U.S., Germany and Switzerland, is the second-largest holding in the Ranmore Global Equity Fund, which outperformed the S&P 500 in 2023, returning 31%. Page pointed out that Carrefour’s revenue has increased significantly in the past few years, while inventory levels have remained stable. FactSet data shows that the retailer’s total revenue will increase from 74.2 billion euros ($80.96 billion) in 2018 to 84.9 billion euros in 2023, a growth of 14.4%. He attributed this to the company’s technological advancements, saying: “They’ve been using technology and artificial intelligence to improve inventory because of weather forecasting and optimizing inventory.” Page told CNBC’s Squawk Box Europe on Friday: “The company The company trades at six times earnings, pays you a 5% dividend yield, and has a great management team, but they’re not popular. However, the stock has not been popular over the past 12 months. It fell 23%, which Peche said was driven by investor interest in artificial intelligence and technology stocks over consumer staples companies. The fund manager also highlighted the growth of Carrefour’s own-brand products, which now account for nearly 40% of revenue. As consumers turn to more affordable options during tough economic times, Carrefour benefits because they earn higher margins on private label products than on branded products. Growth opportunities One potential growth driver for Carrefour is its expanding advertising business, Page said. Carrefour follows other major retailers such as Amazon, Tesco and Sainsbury’s in monetizing its online platform by allowing brands to pay for prominent product placement. “If you think about it, it’s pure cream. There’s not a lot of cost involved,” Page added. Carrefour’s international business also appears to be showing promise, with Peche highlighting the company’s Brazilian operations, which he said is turning a corner. The company generates nearly half of its revenue in France and the remainder overseas, with nearly 15% of sales coming from Brazil. Analyst Views The consensus target price of all analysts surveyed by FactSet is 17.35 euros per share, giving the stock an upside potential of 25%. However, not all analysts share Page’s recent enthusiasm for Carrefour. Stifel’s Cedric Lecasble noted that during a period of high inflation from 2021 to 2023, “the focus on protecting profitability will affect competitiveness.” LeCasbre noted that while Carrefour made price investments to stabilize French market share, similar decisions in other European markets put greater pressure on profitability. UBS also took a more cautious stance in a report to clients on July 25 after announcing its annual results. He said Carrefour expected adjusted profits to reach 2.5 billion euros as Europe’s economy rebounded in the second half of the year, which Mahamkali had “cautiously” not expected. “In fact, we forecast a further slight decline in (adjusted profits in the second half),” he added.
