The chief executive of Carrefour SA is to be replaced by a veteran French clothing retailer after a string of profit warnings sent the French retail giant's share price tumbling.
Lars Olofsson will be replaced by clothing retail executive Georges Plassat at Carrefour's annual shareholder meeting in June, the company said in a statement. The company said Olofsson had informed its board of directors that he would not seek renewal of his mandate at the general assembly June 18, but no explanation for the decision was given.
His exit follows a concerted lobbying campaign to replace him by the company's leading shareholders, including Colony Capital of the US and Bernard Arnault, the head of luxury group LNMH _ the same shareholders who secured the departure of Olofsson's predecessor.
The 60-year-old Swede leaves Carrefour, the world's second largest retailer by sales, in almost the same troubled condition that he found it when he took over the struggling retailer just three years ago.
As then, the company's performance and strategy are in doubt, the share price is lagging and key shareholders have given up waiting for management's repeated attempts to turn round the core hypermarkets business.
Carrefour shares plunged 38 percent last year, well underperforming the wider CAC40 index as the company's serial profit warnings and missed earnings targets sent investors scrambling for the exits.
Olofsson's 62-year-old replacement Plassat joins Carrefour from Vivarte, a French fashion retailer he has run since 2004.
In Carrefour's latest profit warning this month, the company admitted its 2011 earnings would by close to 20 percent lower than in 2010, as sales stagnated and Olofsson's much vaunted revamp of the hypermarkets business failed to pay off with improved margins. The group is scheduled to report 2011 earnings on March 8.
Carrefour's shares were down 3.5 percent in mid-afternoon to euro17.62, underperforming the wider market decline as investors shed risk ahead of an anticipated EU summit in Brussels.
Olofsson's fate was sealed when he lost the confidence of Carrefour's biggest shareholders including private equity firms Blue Capital and Colony Capital and Bernard Arnault, one of France's wealthiest investors and head of luxury goods group LVMH. The three investors own a combined 22.1 percent of Carrefour via a shareholding pact that grants them a heavy say in management's strategy.
These are the same investors who secured the 2009 departure of Olofsson's predecessor, Spaniard Jose-Luis Duran.
Blue Capital, a consortium controlled by Arnault and Colony Capital, took a stake in Carrefour in 2008 with the aim of unlocking the value of the company's real estate.
The investors' impatience with the pace of Olofsson's turnaround was compounded by a nearly one-third drop in the value of their investment over his three-year tenure.
Carrefour's weak spot has long been its hypermarkets, which have seen their profitability erode through lower prices and falling foot traffic as well as market share losses to rivals including Casino, Auchan and Leclerc.
The group's French hypermarkets, its largest division by sales, saw revenue shrink by 4.5 percent excluding the impact of higher gasoline prices at its service stations.
The company has been engaged in an expensive rollout of a new store format it calls "Carrefour Planet," effectively giving its hypermarkets a face-lift in a bid to draw customers back to the suburban mega-stores.
A 3.5 percent drop in traffic at Carrefour's hypermarkets in the fourth quarter showed however that the year-old concept hasn't paid off.
Olofsson was also undone by Carrefour's Brazilian operations, where a 2010 audit discovered hidden losses more than double the group's earlier estimates, forcing it take a euro550 million charge and restate its 2009 financial results.
Carrefour had tried and failed to sell its Brazilian operations to Wal-Mart in 2009, although a report last summer said the U.S. retail giant was considering a new approach.
The French group also failed in a separate attempt to offload the Brazilian stores last year when a plan to merge them with Brazil's largest retailer collapsed after the govenrnment-owned bank financing the project pulled out.