TSCO Tesco Plc

PARIS—Carrefour SA said Thursday its profit fell in the first half, hit by unfavorable exchange rates and difficult conditions in the grocer's home market of France.

Carrefour, which vies with Tesco PLC for the title of the world's second-largest retailer after U.S.-based Wal-Mart Stores Inc., said net profit fell 59% from a year earlier to €129 million ($143 million) as it battled bad weather and repeated labor strikes in France.

First-half recurring operating profit rose 5.3% to €706 million at constant exchange rates, beating analyst expectations of €685 million. Sales for the quarter ended June 30 fell 4.1% to €20.5 billion, hit by currency effects.

Carrefour described sales as "resilient" in France and Europe given the "more difficult consumption environment."

Having returned the company to growth, Carrefour Chief Executive Georges Plassat is now restructuring the retailer's operations in China and working to increase nonfood sales in Europe. He is also seeking to reduce Carrefour's reliance on large hypermarkets—which account for roughly 50% of the company's sales—in favor of smaller convenience stores.

The company, with some 12,000 stores in more than 30 countries, said the transformation of its model in China is well advanced and sales in Brazil—which is in the midst of a prolonged economic recession—stayed strong.

Comparable sales growth slowed to 2.6% in the second quarter, excluding petrol.

Carrefour shares were up 1% in Thursday morning trading.

In France, Carrefour continued to integrate the unprofitable DIA stores that it bought last year, adding that the conversion of the 648 stores to Carrefour banners would be completed by the end of the year.

It maintained its 2016 financial targets, including a higher free cash flow and investments of between €2.5 billion and €2.6 billion.

Ian Walker in London contributed to this article.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

July 28, 2016 05:35 ET (09:35 GMT)

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