Europe‘s biggest retailer warned that “increasingly challenging” economic conditions across Europe will drag its profits down by 15% this year.
Carrefour, the world’s second-biggest retailer behind Walmart, announced a shock €249m (£221m) half-year loss on Wednesday and warned that the situation would get worse before it gets better.
Lars Olofsson, chief executive of Carrefour, which had already warned about profits levels four times in less than a year, said the results were “unsatisfactory” and promised “radical and decisive” action to put the French company “back on a sound footing to rebuild momentum”.
Olofsson, who vowed to make Carrefour “more agile” when he took charge in 2009, admitted he had made mistakes and “tried to do too much too quickly”. He said Carrefour was “biting the bullet in 2011 and rebuilding momentum in 2012 to deliver long-term sustainable profitable growth”.
But City analysts were unimpressed. “Yet another [profit warning] and yet another plan,” said JP Morgan Cazenove.
RBS analysts said: “Given Carrefour’s history on lack of delivery on its guidance, then a more aggressive stance could be taken by the market.”
At the time of the company’s last profits warning, in July, Olofsson said he still hoped to increase full-year operating profits. Yesterday the retailer said they would fall by about 15%.
The company, which runs more than 9,500 stores in 32 countries, said operating profits in its core French market dropped by 40% and Europe overall was down 33%.
It blamed the fall on the rising cost of raw materials and a reorganisation of its systems, which led to it failing to have the right stock on the shelves. The head of the company’s French business said the retailer would now focus on price cuts rather than expensive promotions.
However, the collapse in Europe was offset by a strong performance in emerging markets. The first-half loss was largely the result of an €884m writedown of the value of its struggling Italian business.
Carrefour’s shares, which have lost 40% of their value so far this year, closed down 1. 7% to €18.33.
Vince Cable has insisted the coalition partners are on “common ground” over the need for banking reforms after his attack on banks fuelled speculation of behind-the-scenes divisions with the Conservatives.
The business secretary sought to portray a government in unity over the need to shake up the banking system after giving a newspaper interview in which he accused big banks of using the economic turmoil in Europe to try to derail reform of the financial sector.
The Independent Commission on Banking is expected to recommend ring-fencing banks’ retail operations from their investment arms when it reports on 12 September.
Intensive lobbying by the banking sector ahead of the final report has led to speculation that changes could be shelved until after the next general election amid reports that the Liberal Democrats and the Conservatives are at odds on the timing for implementing changes.
Cable told the Times that “louder and louder voices” were being raised among some of the big British banks warning that regulatory change in Britain would put the recovery at risk. Cable, who acknowledged that any changes would require legislation and would not take place immediately, told the Times: “It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen.”
The prime minister struck a more cautious tone in comments that appeared at odds with the business secretary when he warned against any move that could undermine growth.
Pressed on Cable’s broadside against banks during a visit to the Mini factory in Oxford, Cameron said “no decisions” should be made until the publication of the report next week.
But he added: “I think the key thing we want from banks is lending into the economy so we can support growth and jobs, and we need to make sure we are not taking risks that put jobs at risk.”
Labour seized on the comments to urge the commission to advise “bickering ministers” on the timing for implementing reforms to ensure they are not “ducked” by the coalition government.
But by Wednesday afternoon, Cable was seeking to portray a smooth working relationship with the Treasury and his coalition partners more widely.
Cable told the BBC: “I work very well with my coalition partners in the national interest, on economic matters, we’ve come at this from different directions, but certainly on banking reform, there is a common ground of the need to follow through on the report of the banking commission when its report is finalised in two weeks.”
He added that current instability in financial markets made it “all the more necessary that we press ahead and make our banks safe and reform them”.
Nick Clegg, the deputy prime minister, ducked questions about the timing of reforms, though he stressed that the banking system needed to be reformed because “we cannot ever again allow the banking system to blow up in our face in the way that it did before”.
“I don’t think we should provide a running commentary on the details of a report that none of us have seen yet,” he added.
The director general of the CBI, John Cridland, and the British Bankers’ Association’s chief executive, Angela Knight, have attacked the proposals, with Cridland claiming that action to reform the banks now would be “barking mad”, and Knight warning that imposing the measures on lenders risked denting confidence and cutting the supply of credit.
George Osborne, the chancellor, has indicated he is likely to accept the interim recommendations in favour of ring-fencing high street banks, but he and Cameron are rumoured to be more receptive to bank demands for them to be given several years to deliver the “Chinese walls” while Nick Clegg, the Lib Dem deputy prime minister, backs Cable.
The Independent quoted a Whitehall source as saying: “There is a battle under way now inside the coalition. It is all about timing.”
John Thurso, a Lib Dem MP who sits on the Commons Treasury committee, told BBC Radio 4′s Today programme that banking reform was “absolutely central” for the economy and said the Lib Dems were “absolutely right to keep pushing to make sure it doesn’t go away”.
He said Cable’s comments about bank reform would chime with many of his fellow MPs. “Vince is really expressing the intense frustration that is felt by a vast number of MPs, not simply the Liberal Democrats but other parties as well, that through the summer they have met a great many businesses and, indeed, in my case I’ve met a great many regional bankers who are all actually saying the same thing.
“The businesses are saying, ‘We can’t get the money on terms that are anything like affordable’, and the regional bankers are saying, ‘Our head office is making us turn down deals that we think are good and would help and we would like to do.’”
Cable told the Times he did not expect another 2008-style meltdown in the banking sector, but acknowledged difficulties could still lie ahead for the British economy.
“To my mind, the greater worry is not a massive financial crisis again but it is a general slowing down of western economies, with all the problems that presents for employment and long-term dynamism,” said Cable.
Cridland told Today that his organisation, which includes banks as members, was not opposed to reform but was concerned by the timing and whether the proposals on the table were the right ones.
“There is a real question mark, still, over whether the proposals are the right package and that’s why we should be cautious, because I don’t think it’s absolutely clear that [Sir John] Vickers [chairman of Independent Commission on Banking] has got it right,” the CBI chief said.
There had been a “radical slowdown” in the world economy since Vickers published his interim proposals, said Cridland, and there would be a “major problem” if growth stagnates, he said.
“At that point, my businesses being able to get cash from their banks is critical, and anything that makes it harder for the banks to keep the wheels of the economy well oiled is not good timing.”
A Treasury spokesman said: “It’s too early to be talking about timings and no decision has been taken: the final report is not due until later this month.”
Chris Leslie, Labour’s shadow Treasury minister, called on the government to “get a grip” and not be sidetracked by coalition rows.
“The choked off recovery we’ve seen since George Osborne’s spending review and VAT rise should not be an excuse for ducking the necessary reforms,” he said.
“And nor should rows between senior cabinet ministers and coalition politics, nor lobbying by the banking industry, stand in the way of delivering banking reforms that are in the national interest. That’s why in its final report next month the Vickers Commission should advise bickering ministers on the timing for implementing these reforms.”
David Hillman, spokesman for the Robin Hood Tax campaign, said bank lobbyists should not be allowed to deter necessary reforms to the sector.
“An out-of-control banking sector is no basis for economic recovery. Banks should be made to pay for the damage they caused and not be allowed to repeat the mistakes of the past. We must not be deterred by bank lobbyists whose idea of ‘economic recovery’ means increasing bank profits.”
The US government has attempted to block the $39bn (£24bn) takeover of T-Mobile by ATT on antitrust grounds.
The department of justice filed court papers in Washington in an attempt to halt the merger, claiming that it would “lessen competition substantially” in the telecoms market and harm consumers.
ATT said it was “surprised and disappointed” by the government intervention.
“ATT’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the department of justice said in its filing, which was first reported by Bloomberg.
The multibillion-dollar merger, announced in March, would create the largest mobile provider in the US with 130 million customers, reducing the number of players in the market from four to three.
The US telecoms giant ATT is the second largest network in the US, behind Verizon Wireless, with T-Mobile the number four network. Sprint Nextel is the other remaining large operator in the country, with the third largest service.
The department of justice court filing, seen by the Guardian, concludes that the ATT-T-Mobile merger would cause: “actual and potential competition between ATT and T-Mobile will be eliminated; competition in general likely will be lessened substantially; prices are likely to be higher than they otherwise would; the quality and quantity of services are likely to be less than they otherwise would due to reduced incentives to invest in capacity and technological improvements; and innovation and product variety likely will be reduced”.
Wayne Watts, senior executive vice-president and general counsel at ATT, said in a statement: “We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the department of justice and there was no indication from the DoJ that this action was being contemplated.
“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court.”
He said the merger would result in billions of dollars in additional investment and tens of thousands of jobs, and would improve wireless access for millions of people.
He added: “We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.”
ATT proposed in March to pay $25bn in cash for T-Mobile USA and the rest in stock, giving T-Mobile’s German parent an 8% stake in ATT. The agreement was approved by the boards of directors at both ATT and Deutsche Telekom.
Regulators have pored over the terms and implications of the deal for months, given its size and scale. ATT’s shares were down 3.85% in early-morning trading on the New York stock exchange, trading at $28.53. In late Frankfurt trading, shares in the T-Mobile parent company Deutsche Telecom were down 4.8% at €9.08.
Shares in Sprint Nextel, ATT’s rival mobile operator, soared 7.6% on the news as analysts predicted that the government block could benefit competitors.
“At the very least, this will now create a massive uphill battle for ATT in consummating its merger, and will create significant delays,” said Jan Dawson, chief analyst at Ovum. “At worst, it will prevent the merger from happening entirely, which will result in a massive breakup fee of several billion dollars and various other concessions on the part of ATT.”
ATT promised T-Mobile $3bn in cash if the deal fails to go through, as part of the terms of the merger.
Dawson added: “The uncertainty created in the meantime poses several very difficult decisions for ATT, especially in terms of network investments. It will have to decide whether to press ahead with its own LTE rollout on the assumption that T-Mobile’s network assets and spectrum will eventually be part of it, or whether to pursue another strategy for rolling out 4G.”
ATT sought to fend off antitrust complaints in March. The Dallas, Texas-based telecom argued that the US wireless industry is “one of the most fiercely competitive markets in the world and will remain so after this deal”.
The department of justice had not returned requests to comment at the time of publication.
As markets moved higher once more, a spate of takeover talk helped fuel the gains, with transport group National Express tipped as a possible target.
Shares in the bus and rail group accelerated 16.4p to 250.8p as analysts at UBS labelled it as one of its top MA picks. Nearly two years ago private equity group CVC made a £765m offer in tandem with Spain’s Cosmen family, but this was later withdrawn after no agreement could be reached. The Cosmens still own 17%, while US group Elliott Advisors holds 17.95%. Earlier this year Elliott called for a boardroom shake-up but the two sides finally called a truce. In a buy note with a 280p price target, UBS said:
We view National Express as an “unfinished business” situation and see it as the most likely target due to its diversified business mix, its valuation versus peers and deal economics, and the presence of deal-friendly shareholders (Cosmen and Elliott). We see SNCF/Keolis, NedRail, Stagecoach and Veolia as possible bidders.
Elsewhere Smith and Nephew added another 29p to 625.5p after this week’s speculation of an 850p a share bid, with rivals Stryker, Johnson Johnson and Biomet all mentioned as possible predators. But some analysts were sceptical. Justin Smith of MF Global said:
We believe an acquisition of Smith Nephew by Stryker or Johnson Johnson would not be cleared by the US anti-trust authorities because the combined market shares of the hip and knee implant businesses would be anti-competitive. In our view the extent of the divestments which would be required for the deal to be cleared by anti-trust would also compromise the strategic rationale of an acquisition because the synergies would be so limited.
Meanwhile engineer Renishaw rose 136p to £14.10 on vague takeover chatter.
Overall the FTSE 100 finished up 125.87 points at 5394.53, its highest level since August 3. Over the past turbulent month the leading index has lost 400 points – its worst monthly performance since May 2010 – but it has seen an increase of £101bn in its value since its 52 week low on August 10. Despite mixed jobs and manufacturing data from the US, Wall Street was around 60 points higher by the time London closed, mainly on hopes that the US Federal Reserve would step in to boost the country’s flagging economy.
Wolseley rose 76p to £16.02 after Exane BNP Paribas issued an outperform rating on the building materials company. But British Land dropped 5p to 539p following Morgan Stanley moving from overweight to underweight. Schroders non voting shares slipped 6p to £11.90 as Citigroup downgraded the asset manager from buy to hold.
Bwin.party digital led the mid-caps higher, up 15.3p to 125.3p after the online gaming group gave a positive outlook despite a 21% drop in first half earnings, but JKX Oil Gas lost 9.1p to 187.4p as profits fell 32% following higher taxes in the Ukraine and further delays with a key Russian field.
Lower down the market financial services group Merchant Securities moved 3.5p higher to 15p on news of a preliminary approach from South Africa’s Sanlam, which has already snapped up 9.74% of its target at 14p a share.
Finally green technology company TEG added 0.25p to 10.25p after its 70% owned joint venture with energy group Alkane won a 15 year contract with three Welsh councils to build a plant to process food waste to supply energy for up to 2,000 homes. Analysts at house broker Ambrian said the plant should generate £2m a year in revenues and £1.1m in earnings.
The basic model of Sony’s main tablet, shown at the IFA show in Berlin, is priced at $499 (£306), the same as the iPad – a price where Hewlett-Packard and other tablet companies have failed to dent Apple’s dominance.
Sony had vowed in January that by 2012 it would become the world’s No 2 tablet maker – behind Apple – and it stuck by this bold claim at IFA where its chief executive Howard Stringer introduced the devices.
“We want to prove it’s not who makes it first that counts, but who makes it better,” Stringer said.
Sony is late to the game, with its first tablet due to hit store shelves in September. Its release is more than 18 months after Apple released the iPad, and almost a year since Samsung came out with its first Galaxy Tab.
Both of the tablets deviate from the now-standard slimline format that has Samsung in legal trouble with Apple, where it is accused of copying elements of the iPad – leading to an injunction on the sale of its latest tablet in Germany, and potentially across Europe.
From the side, the Sony Tablet S, which has a 9.4-inch screen, resembles a cross-section of an aircraft wing. The Tablet P, which will be heavily promoted as an ebook reader as well as a web-browsing device, is a clamshell device with twin 5.5-inch screens. Both will come with Google’s Android 3 “Honeycomb” tablet software: the Tablet S with 3.1 and the Tablet P to follow with Android 3.2.
Sony is trying to distinguish its Android tablets with features that let one tablet function as a universal remote, while another one folds like a clamshell.
Both tablets come integrated with Sony’s music, video and ebook services, marking them out from many other Android tablets, which have struggled to integrate compelling content services in the way Apple has with iTunes music, TV, film and app stores.
Stringer, the company’s Welsh-born chairman, president and chief said Sony, which owns film studios and a record company, is uniquely positioned as a producer as well as distributor of such media. “Apple makes an iPad, but does it make a movie?” he asked.
Sony’s European tablet product manager, Samir Militao, said: “We think that we have a unique design. We try to differentiate our products to [various criteria] and design is one of them.”
Militao said the tablets tie in with Sony’s extensive range of consumer electronics. The Tablet S has infrared functionality that makes it usable as a remote control for Sony TV sets, for instance, and users can also “flick” music to DLNA-enabled hi-fi systems.
Sony has priced the devices firmly at the high end, alongside Apple. The Tablet S will go on sale in Europe from the end of September at a starting price of £479, depending on the configuration. The pocket-sized Tablet P will follow in November, starting at £599.
Sarah Rotman, at research firm Forrester, said: “Sony is no copycat … but the price raises a red flag. We’ve been down this road before: Motorola and HP both priced their devices on par with the iPad, and both were unable to sell their devices in volume until they lowered the price significantly.”
She added: “My concern for Sony is not price competition with Apple but price competition with Amazon, whose [Android] tablet we expect to be significantly cheaper.”
At least one gadget reviewer who has played with the new “Sony Tablet S” is not so sure Sony will achieve its aim of becoming the second behind Apple. “I don’t think it has the premium feel, design and build quality that either the iPad 2 or [Samsung] Galaxy Tab has right now,” said Tim Stevens, editor-in-chief of Engadget.
“I honestly don’t think this is going to be the tablet that really catapults Sony into the lead on the Android front, which is where it needs to be if it wants to be No 2 in the tablet market.”
There has been little buzz generated ahead of the release, unlike the anticipation for the iPad or even the Galaxy Tab.
Sony hopes the tablet will restore its leading position in consumer electronics. Once a symbol of Japan’s high-tech might, the Japanese electronics conglomerate is struggling under the weight of its money-losing TV division and badly needs the boost of a new hit product.
“Sony really must be in the tablet market and must succeed,” said Mito Securities electronics analyst, Keita Wakabayashi.
Worldwide tablet shipments are forecast to more than triple this year to 60m units, and then rise to 275.3m units by 2015, according to a report this month from research firm IHS iSuppli.
Meanwhile Dixons Store Group said that it would allow online pre-ordering of the Sony Tablet S for the next two weeks. Mark Slater, category director at Dixons Retail, said: “Sony’s Tablet S is a real contender in the tablet market and one we expect to be a big success. The two week preorder period for the Sony Tablet S will be a very exciting period for us to see how popular this tablet will be with our customers.”