Credit Where Credit is Due

Research evidence excerpt

Credit Where Credit is Due

IdeaMcapital through an enhanced JV in banking.

Financials: Carrefour targets operating margin of 3.2% in 2028 and 3.5% by 2030

(vs~2.6% in 2025). Improvements should already start in 2026e, when Carrefour

targets >25bp y/y expansion in operating margin. The target is underpinned by

market share gains across the three key countries (France, Spain, Brazil), costs

savings of €1 bn per annum (purchasing leverage, HQ simplification and AI

automation), and monetization of data and retail media via partnership with

Unlimitail (aiming to double revenue of JV by 2028). Our analysis shows cost

execution under the current management team has been strong, with ~130bp

improvement in the efficiency ratio since 2021. French margin has also been

expanding at a steady clip of 10-30bps pa over the past seven years, which we

expect to continue, driven by franchising, Cora synergies, and better volume

dynamics.

Valuation provides an attractive entry point. Our base case is for exit margin of

~3.2% in 2028e; on our numbers, the stock trades on an undemanding ~8.2x 2027e

P/E, ~1.3x STD deviation below the long term P/E, ~30% discount to history, ~40%

discount to peers. Given the mix of the portfolio, Carrefour's complexity, and

historical track record, we would value the stock at a discount to peers; however we

think the current penalty is excessive and think ~10x P/E should be a reasonable

starting point, with scope for further re-rating long-term, as confidence in delivery

improves (vs a sector through the cycle multiple of ~12x).

Is it different this time? We have been wrong on Carrefour before. The last time we

had an Overweight was in 2023, premised on (1) self-help from strategic levers in