Sales Forecasting 2011 for CarrefourOperations Management

Submitted By: Anurag Bhargava (11DCP068) Gaurav Tripathi (11DCP074) Nirvan Rustagi (11DCP085) Yudhvir Singh (11DCP103)

ContentsIntroduction...........................................................................................................2 Strategy................................................................................................................3 The Carrefour Group's Geographical Priorities......................................................3 Forecasting Methodology......................................................................................4 Sales Forecasting For Carrefour in France.............................................................5 Hyper Markets....................................................................................................5 Super Markets....................................................................................................6 Other Format Stores...........................................................................................7 Hard Discount Stores.........................................................................................8 Sales Forecasting For Carrefour in Rest of the World:...........................................9 Western Markets - Europe except France..........................................................9 Latin America...................................................................................................10 Asia..................................................................................................................11 Result..................................................................................................................12 Result

IntroductionThe Carrefour group: a world leader in distribution Over the past 40 years, the Carrefour group has grown to become one of the worlds leading distribution groups. The worlds second-largest retailer and the largest in Europe, the group currently operates four main grocery store formats: hypermarkets, supermarkets, cash & carry and convenience stores. The Carrefour group currently has over 9,500 stores, either company-operated or franchises. An international retailer A pioneering entrant in countries such as Brazil (1975) and China (1995), the group currently operates in three major markets: Europe, Latin America and Asia. With a presence in 32 countries, over 57% of group turnover derives from outside France. The group sees strong potential for further international growth in the future, particularly in such large national markets as China, Brazil, Indonesia, Poland and Turkey. Promoting the growth of local economies Wherever it has a presence, Carrefour is actively committed to promoting local economic development. Since retail activities are all about contact with people, the group consistently emphasizes local recruitment plus management and staff training on the job wherever they work. Typically, the Carrefour group will be one of the leading private employers in any country where it operates. Naturally, this is the case for France, where the group was originally founded, but it is also true of such countries as Brazil, Argentina, Colombia, Italy and Greece. The group also seeks to support local suppliers, with some 90-95% of the products on its shelves sourced locally, depending on the country. STORES Hypermarkets, the retail business of today Carrefour market, the ideal supermarket Convenience: always attuned to customer needs Cash & carry: proximity and accessibility for catering professionals E-commerce

StrategyThe Carrefour group has one simple ambition: Making Carrefour the preferred retailer wherever it operates. The strategy of the Carrefour group is aimed at achieving organic, sustained, profitable growth in excess of the broad market growth rate, and has three levers: Client-oriented culture : Getting to know our customers better in order to serve them better Transformation : competitiveness increasing agility, execution quality and

Innovation : regaining initiative and leadership

The Carrefour Group's Geographical PrioritiesFrance is Carrefour's established home market and the group's main priority. The Group is taking the initiative to regain its leadership in France. The objective is to generate growth, firstly by developing its multi-format model, increasing convergence and giving fresh impetus to hard discount formats, and secondly by enhancing sales growth, price competitiveness and its price image. The Carrefour group's second priority consists of Spain, Italy and Belgium which, together with France, make up Carrefour's "G4" countries. In these mature European countries, appropriate measures will be taken to maintain growth (Spain) or improve performance (Belgium and Italy). Growth markets represent the Carrefour group's third priority. The Group will focus most of its development resources on countries with stronger growth potential. The Group's development in these regions will be based on various formats aimed at building the customer base (hypermarkets, cash and carry etc.).

Forecasting MethodologyCarrefour is expanding in the global markets at a very high pace. The company has successfully entered new markets where the concept of organized retail was new and independent retailers were operating. It has successfully expanded its operations base from France, Europe to Latin America and Asia. In countries like United Arab Emirates Carrefour has become iconic and has become a part of the shopping experience for the consumers. Forecasting not alone can predict the sales but also the current economic trends, consumer confidence and new offerings are pivotal in boosting the sales. However the sales forecasting gives us an idea of the growth of the company keeping all other factors unchanged. It helps the company to have an idea about the sales and to keep their inventory levels at par with the demand. The sales forecasting is done by taking the data of 10 years from 2001 to 2010. During this time period Carrefour has added several stores and new countries particularly in Latin America and Asia in its portfolio. For the study, we selected the historical sales figures of the last 10 years, i.e. 2001 to 2010, available on the Carrefour groups website. The link for the same is mentioned below: http://www.carrefour.com/cdc/finance/sales-and-results/our-sales/ The sales figures are available on quarterly basis, and distributed sector wise as follow: France (Hyper Markets, Super Markets, Hard Discount Stores & Other Format Stores) Growth Markets - Western Europe except France Latin America Asia

We have attempted to forecast the sales figures for each quarter of 2011 and compare it with the declared quarterly results of 2011. The forecasting method used is Seasonal Forecasting, and the error in forecast and actual sales has been calculated using Mean Absolute Percentage Deviation (MAPD). We have tried to explain this MAPD in terms of current market conditions and strategies of Carrefour.

Sales Forecasting For Carrefour in FranceHyper MarketsYear Quarter-1 2001 4907 2002 4957 2003 4983 2004 4797 2005 4872 2006 5081 2007 5258 2008 5322 2009 5100 2010 5238 Total 50515 Hyper Markets Forecast: QuarterQuarter2 Quarter-3 4 Total 5063 5096 5993 21059 5044 5225 6094 21320 5160 5229 5988 21360 4981 5092 6004 20874 5000 5214 6038 21124 5429 5600 6162 22272 5549 5560 6451 22818 5420 5690 6233 22665 5201 5292 6066 21659 5449 5510 6217 22414 52296 53508 61246 217565

Intercept (a): 20820.73 Slope (b): 170.14 Equation: 20820.73 + 170.14 X Total Annual Forecast for 2011 ( M) 22692.27 Quart Seasonal Forecas Actual Error er factor t Demand (MAPD) 1 0.2322 5268.77 5254 0.281% 2 0.2404 5454.53 5466 0.210% 3 0.2459 5580.94 5409 3.179% 4 0.2815 6388.02 The actual sales in the hypermarkets of France attributes to the large basket size of an average shopper. The sales have been very consistent and the markets have reached a saturation level

Super MarketsQuarterQuarterYear Quarter-1 2 Quarter-3 4 Total 2001 1749 1888 1847 1897 7381 2002 1840 1947 1937 1983 7707 2003 1911 2020 1984 2049 7964 2004 1941 2075 2099 2201 8316

2005 1964 2006 2073 2007 2158 2008 2304 2009 2120 2010 3015 Total 21075 Super Markets Forecast : Intercept (a): Slope (b): Equatio n: Total Annual Forecast ( M)

2084 2262 2290 2411 2306 3250 22533

2112 2264 2250 2342 2292 3242 22369

2186 2251 2408 2316 2412 3296 22999

8346 8850 9106 9373 9130 12803 88976

6608.33 416.23 6608.33 + 416.23 X for 2011 11186.87

Quarte Seasonal Actual Error r factor Forecast Demand (MAPD) 1 0.2369 2649.74 3110 14.80% 2 0.2532 2833.05 3352 15.48% 3 0.2514 2812.43 3335 15.67% 4 0.2585 2891.64 The supermarkets have shown an increase in sales against the expected sales. This is due to the integration of the various Carrefour stores into one unit and also the closing of the discount stores in France has moved the shoppers towards Super Markets and other convenient stores.

Other Format StoresQuarte QuarterYear Quarter-1 r-2 Quarter-3 4 Total 2001 1951 2074 2207 2082 8314 2002 1925 2057 2190 2151 8323 2003 2024 2118 2290 2179 8611 2004 1999 2145 2245 2145 8534 2005 1962 2106 2191 2045 8304 2006 1878 1976 2087 1881 7822 2007 1739 1830 1918 1844 7331 2008 1743 1867 2051 1910 7571 2009 1687 1924 2175 2024 7810 2010 863 1008 1073 982 3926 Total 17771 19105 20427 19243 76546 Others Forecast : Intercept (a): 9400.4

0 Slope (b): -317.42 Equation: 9400.40 - 317.42 X Total Annual Forecast for 2011 ( M) 5908.80 Quart er 1 2 3 4 Seasonal factor 0.2322 0.2496 0.2669 0.2514 Foreca Actual Error st Demand (MAPD) 1371.7 9 920 49.11% 1474.7 7 1044 41.26% 1576.8 2 1127 39.91% 1485.4 2

In the other discount stores the sales were down. This is because a large number of one off store was closed and the logistics were merged with the supermarkets to consolidate the market holdings and to increase the sales in the ultracompetitive supermarket chain. This was as expected by the company.

Hard Discount StoresQuarterQuarterYear Quarter-1 2 Quarter-3 4 Total 2001 411 439 403 441 1694 2002 438 450 431 478 1797 2003 481 510 487 536 2014 2004 557 592 554 594 2297 2005 582 625 568 636 2411 2006 666 705 668 694 2733 2007 697 734 676 724 2831 2008 738 757 683 702 2880 2009 685 710 641 651 2687 2010 676 708 663 689 2736 Total 5931 6230 5774 6145 24080 Hard Discount Forecast : Intercept (a): Slope (b): Equatio n: 1679.27 132.50 1679.27 + 132.50 X 3136.73

Total Annual Forecast for 2011

( M) Quarte Seasonal Actual Error r factor Forecast Demand (MAPD) 1 0.2463 772.59 636 21.48% 2 0.2587 811.54 3 0.2398 752.14 4 0.2552 800.47 The rising costs to operate the hard discount stores and to maintain the profit margin was taking the toll on the companys profits. The sales were growing in the hard discount stores continuously from 2001 to 2010and these stores were converted into the DIA banner, a subsidy of the company. This is a part of the company strategy and fully integrated in the plans of the company to capture the market and maintain their market share as well.

Sales Forecasting For Carrefour in Rest of the World:Western Markets - Europe except FranceQuarte QuarterQuarter-1 r-2 Quarter-3 4 Total 2001 5648 5968 5992 7006 24614 2002 5984 6249 6517 7475 26225 2003 6394 6887 7062 8056 28399 2004 6890 7306 7459 8496 30151 2005 7317 7638 7887 8807 31649 2006 7614 8066 8406 9134 33220 2007 8132 8535 8558 9665 34890 2008 8571 8869 9058 9581 36079 2009 8066 8419 8463 9200 34148 2010 8062 8171 8348 9065 33646 Total 72678 76108 77750 86485 313021 Western Markets Forecast: Intercept (a) 24937.53 Slope (b) 1157.19 Equation: 24937.53 + 1157.19 X Forecasted Demand 37666.6 for 2011 6 Seasonal Foreca Actual Error Quarter factor st Demand (MAPD) 1 0.2322 8745.54 7763 12.66% 2 0.2431 9158.28 6611 38.53% 3 0.2484 9355.87 6597 41.82% 10406.9 4 0.2763 7 The sales in Western Europe have fallen drastically against the 10 year trend where the company was picking up sales at a clockwise pattern. This was totally unexpected by the company and driven by the market factors and the reigning sovereign debt crisis all the countries in which Carrefour is present marked low sales. The low sales volume was particularly in electronics and other consumer durables. Slowdown affected Spain, Italy considerably but however Belgium showed positive signs and gained more sales than the forecasted. This trend seems to last into the last quarter as well, with the festival season underway the sales are expected to rise but reaching the forecasted level is still optimistic. The realistic sales in this quarter would be close to 9000 million euros Year

Latin America

QuarterYear Quarter-1 2 Quarter-3 2001 2536 2604 2404 2002 1899 1653 1378 2003 1232 1353 1405 2004 1307 1379 1400 2005 1321 1472 1663 2006 1662 1720 1704 2007 1828 2320 2605 2008 2837 2956 3200 2009 2926 3209 3368 2010 3813 4288 4506 Total 21361 22954 23633 Latin America Forecast : Intercept (a): 4013.47 Slope (b): 986.02 Equatio n: 4013.47 + 986.02 X Total Annual Forecast for 2011 ( M) 14859.69 Quarte Seasonal Actual r factor Forecast Demand 1 0.2264 3363.69 4577 2 0.2432 3614.54 4168 3 0.2504 3721.46 4292 4 0.2800 4160.01

Quarter4 Total 2595 10139 1460 6390 1604 5594 1590 5676 1942 6398 2022 7108 3021 9774 3279 12272 3924 13427 4981 17588 26418 94366

Error (MAPD) 26.51% 13.28% 13.29%

The upward trend is followed from 2010 to 2011 and the sales have been consistently very high in the countries like Argentina and Brazil. In Argentina, the growth is close to 17%. This is attributed to the stable exchange rates and the economic growth in the region. This in turn boosted the consumer confidence and the sales in the electronic goods were particularly noticeable.

AsiaYear 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Quarter QuarterQuarter-1 -2 Quarter-3 4 Total 1261 1128 1275 1265 4929 1331 1175 1258 1255 5019 1258 1098 1332 1349 5037 1356 1302 1464 1406 5528 1568 1426 1642 1645 6281 1446 1220 1372 1383 5421 1665 1384 1542 1461 6052 1860 1441 1699 1720 6720 2133 1674 1787 1718 7312 2107 1833 2067 1898 7905 15985 13681 15438 15100 60204

Total Asia Forecast: Intercept (a) 4288.33 Slope (b) 314.92 Equation: 4288.33 + 314.92 X Forcasted Demand for 2011 7752.45

Quarter 1 2 3 4

Seasonal Forecas Actual Error factor t Demand (MAPD) 0.2655 2058.38 2438 15.57% 0.2272 1761.70 1768 0.36% 0.2564 1987.95 2037 2.41% 0.2508 1944.42

Carrefour is new player in Asia and with the Asian economy booming, and organized retail picking up pace, the sales have surpassed the benchmark in the first quarter due to the opening of new stores and then have stabilized in the second and third quarter. The last quarter is the most important quarter for the company to access the purchasing power of the consumers and also with the festival season, the sales are expected to surpass the forecast by a huge margin.

Result

With the complete analysis of the sales of Carrefour, by breaking the sales of the company into quarters and different markets, the forecast for the Quarter 4 can be made France The overall markets in France have become stagnant with the sales peaking in the festival season the company expects to do good business but the growth in sales is not expected significantly. Western Markets Due to the downturn in economic conditions which have marred the Western Europe the sales are down throughout the year in all quarters and the same trend is likely to follow Latin America The markets have grown consistently and the trend is expected to follow Asia The markets have grown consistently and the trend is expected to follow in the last quarter as well

As stated by the graph, the sales of Carrefour have been very consistent with the forecasted sales. This is because as the western markets of France are saturating, Carrefour has expanded its consumer base by moving out to the new emerging markets and entering the countries which lack organized retail. With India now opening itself to 51% FDI in the retail sector, it gives Carrefour opportunity to expand in one of the biggest consumer markets in the emerging countries.