The Summary of Carrefour Case

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SUMMARY OF CARREFOUR

Carrefour S.A. was Europe’s largest retailer. In the past, Carrefour management had generally financed company growth through securities denominated in the currency of business operation. Carrefour considers borrowing in British pounds sterling in order to take advantage of a borrowing opportunity in that currency. With a debt-financing requirement of EUR750 million, the bond issue would be one of Carrefour’s largest.

It altered the world of retailing with the introduction of the “hypermarket”.
This format combined a supermarket, drugstore, discount store, and gas station into one massive, one-stop-shopping megastore. The company expanded rapidly in France and beyond. Carrefour was profitable in all major operation regions. The company generated 5% of operating profits from Asia, 2% from Latin America and 26% from Europe outside France, with the remainder of profit coming from French operations.
The company would increase sales by 5% on constant exchange rates and increase recurring net income by 10-15%

Carrefour’s Financing Policy operated primarily within the local economy when buying and selling product In 2001, Carrefour borrowing were EUR 13.5 billion, of which EUR6.4 billion were in publicly traded bonds. Foreign-currency borrowing was generally hedged so that total debt requirements were currently 97% in EUROS.

Carrefour’s current market opportunities considered the bond-denomination decision, It also considered the current inflation, interest-rate, and exchange-rate environment. Over the past three, long-term bond yields had declined in all four currencies. Over the past five years, the euro had depreciated against most major currencies. Should this trend continue, paying down foreign-currency debt with euro-denominated cash flow would become increasingly expensive.

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