Carrefour's Q2 2025 LFL Sales Growth and Strategic Reforms: A Blueprint for Long-Term Value Creation

Carrefour's Q2 2025 results, marked by a 4.4% like-for-like (LFL) sales growth, represent more than a quarterly victory—it is a sign of a company recalibrating for sustained resilience in a volatile retail landscape. The French retail giant, long a bellwether of European consumer trends, has navigated a complex mix of inflationary pressures, supply chain disruptions, and shifting consumer behavior with a strategic clarity that suggests it is positioning itself for long-term value creation. For investors, the question is whether these moves translate into durable competitive advantages or are merely tactical adjustments in a high-stakes game.

The Numbers: A Turnaround in Core Markets

Carrefour's Q2 LFL sales growth of 4.4% outperformed expectations, driven by a 4.9% rise in food sales and a 1.4% increase in non-food sales. This momentum was particularly notable in its core markets:
- France: A 2.1% LFL growth reversed a 1.7% decline in Q1, signaling improved consumer confidence and effective pricing strategies.
- Spain: Sales growth accelerated to 2.9% from 1.4% in Q1, reflecting the company's deepening market share in a region where it has invested heavily in value-based commercial policies.
- Brazil: The 4.4% LFL growth, though slightly lower than Q1's 5.4%, remains robust given the high base from Q2 2024, when Brazil's sales surged 6% year-over-year.

These results are not just about volume—they reflect a recalibration of Carrefour's value proposition. In France, for instance, the company's focus on “value-based commercial policies” has stabilized non-food sales, which had previously lagged. This is critical in an environment where consumers are increasingly price-sensitive but still seek quality.

Strategic Reforms: From Cost-Cutting to Brand Synergy

Carrefour's 2025 strategic reforms are a masterclass in operational pragmatism. The acquisition of the remaining 33% stake in Carrefour Brasil for €2.3 billion (finalized in April 2025) is a cornerstone of this strategy. By consolidating full ownership, Carrefour eliminates operational redundancies and gains flexibility to implement cost-saving initiatives, including its €1.2 billion global cost-cutting plan. The integration of Carrefour Brasil is also a test of the company's ability to harmonize its brands—Carrefour, Atacadão, and Sam's Club—into a cohesive ecosystem.

A key innovation is the cross-brand loyalty program, “Meu Grupo Carrefour,” which allows customers to use Carrefour credit cards at Atacadão and Sam's Club. This not only enhances customer retention but also creates a unified data pool for targeted marketing. Atacadão's performance—6.9% LFL sales growth in Q1 2025—demonstrates the potential of this model. By replicating Atacadão's lean, customer-centric approach across its broader operations, Carrefour aims to reduce bureaucracy and improve decision-making agility.

The company's decision to exit Italy via a €1 billion sale to NewPrinces Group further underscores its focus on core markets. While divesting underperforming assets may seem defensive, it is a calculated move to redirect capital to higher-growth regions like Brazil and Spain. The sale also aligns with a broader industry trend of retail consolidation, as seen in Walmart's and Tesco's similar strategies.

Inflation Management: Price Cuts as a Growth Lever

Inflation has been a double-edged sword for Carrefour. While it has eroded margins, the company has turned it into a competitive advantage through strategic price investments. In Q2 2025, Spain's ROI rose 9.4% year-over-year, driven by aggressive price leadership. Similarly, in Brazil, where inflation remains stubborn, Carrefour has delayed passing on cost increases to consumers, cushioning demand while maintaining nominal revenue growth.

The creation of Concordis, a European buying alliance with Coopérative U, is a bold move to counterbalance FMCG supplier power. By pooling purchasing volumes, Carrefour aims to secure better pricing and reduce dependency on volatile global supply chains. The alliance's initial focus on 40 multinational FMCG suppliers for price negotiations and 60 for international services suggests a data-driven approach to procurement.

Financial Resilience and Risk Factors

Carrefour's financials, while not stellar, are improving. Recurring operating income (ROI) in H1 2025 was €681 million, a 20% increase year-over-year excluding the drag from the Cora & Match acquisition. Net free cash flow (NFCF), however, remains a concern, with a -€386 million result in H1 2025. This is partly due to FX headwinds in Latin America (-€61 million) and the integration of Cora & Match. That said, the company expects NFCF to improve in H2 2025 as EBITDA growth offsets these pressures.

For investors, the key risk lies in Carrefour's ability to sustain its cost-cutting momentum while maintaining service quality. The company's 2025 target of €4.2 billion in cumulative cost savings by 2026 is ambitious but achievable given its track record. However, over-reliance on price cuts could erode margins if inflation persists.

The Long View: A Buy for the Patient Investor

Carrefour's integration of Carrefour Brasil and its focus on operational efficiency position it as a compelling long-term investment. The company's 2026 targets—€10 billion in e-commerce GMV, 40% of food sales via private labels, and 2,400 convenience stores—suggest a clear roadmap for growth. While short-term volatility from FX and inflation is inevitable, the structural reforms Carrefour is implementing address the root causes of its historical struggles.

Investors should monitor three metrics:
1. ROI growth in core markets (France, Brazil, Spain), which will indicate the effectiveness of pricing strategies.
2. Cost savings realization, particularly from the Concordis alliance and Atacadão integration.
3. Debt reduction, as Carrefour's net debt-to-EBITDA ratio (2.35x in December 2024) remains a drag on valuation.

In conclusion, Carrefour's Q2 2025 performance and strategic reforms suggest a company that is not just surviving but adapting to a new retail paradigm. For the patient investor, the stock offers a compelling opportunity to bet on a well-managed, diversified retail giant with a clear vision for the future.