TCEHY Tencent Holdings Ltd (PK)

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By Anthony Shevlin

French retailer Carrefour SA (CA.FR) on Tuesday said that it intends to cut jobs, form new partnerships and reduce costs as part of a new strategic plan aimed at shoring up its faltering performance.

Among the measures are a partnership with China's Tencent Holdings Ltd (0700.HK) and the offer of voluntary-redundancy packages for thousands of employees in France.

Carrefour, Europe's biggest retailer by revenue, last week cut its earnings outlook as it continues to struggle with eroding domestic-market share. It faces challenges outside France and from digital competitors.

Investors seemed to welcome the plan. At 0849 GMT, Carrefour shares were trading 5.7% higher at EUR19.51.

"[The] transformation plan ticks all the right boxes," analysts at Bernstein said, citing measures focused on productivity and competitiveness gains, investment and a simpler organization.

The retailer plans investments of 2 billion euros ($2.44 billion) annually as of this year, with EUR2.8 billion over the next five years set to be channeled into enhancing its digital offering.

As part of its digital plan, Carrefour said it aims to become a key player in food e-commerce with a market share of at least 20% in France by 2022 and sales of EUR5 billion.

Carrefour said will offer about 2,400 employees a voluntary-redundancy package at its French headquarters in the Ile-de-France region. The company said it will close the headquarters in Boulogne and scrap plans to build new headquarters in Essonne. Carrefour currently employs 10,500 people at its head office.

Meanwhile, Carrefour said it plans to divest 273 former Dia stores. If a buyer isn't found, they will be closed, the company said.

Carrefour said it has also made agreements for new partnerships, including a strategic cooperation with Tencent in China aimed at improving Carrefour's online visibility, increasing traffic both offline and online and using Tencent's expertise to develop retail initiatives. The deal is subject to further diligence.

Tencent and Yonghui Superstores Co. Ltd (601933.SH) have shown interest in making a potential investment in Carrefour China, though Carrefour would remain the largest shareholder in the operation, it said.

"While some will be disappointed not to see an outright sale of China, these are both strong strategic partners and we would argue give the group the best possible ability to turn the business around," Bernstein said.

Elsewhere, Carrefour entered a partnership with Stuart, a subsidiary of the La Poste (PST.YY) group, aimed at improving deliveries. Carrefour said it had formed another partnership with Sapient, a division of the Publicis Groupe SA (PUB.FR), to implement the transformation of its e-commerce offer.

Carrefour said it plans to cut costs by EUR2 billion annually by 2020. It said measures to achieve this aim will include the optimization of direct purchasing, the rationalization of indirect purchasing and the reduction of logistics costs.

The retailer said it aims to maintain its dividend policy, with a payout of between 45% and 50% of adjusted net profit.

Write to Anthony Shevlin at anthony.shevlin@dowjones.com

(END) Dow Jones Newswires

January 23, 2018 04:10 ET (09:10 GMT)

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