Carrefour Case

Introduction

Carrefour S.A. (Carrefour) is a retail corporation located in France. Carrefour is Europe’s largest retailer, with 5,200 stores and revenues of €53.9 billion. Over the last four years they have been growing thru acquisitions, mostly outside of France.

Company History

Carrefour is responsible for introducing the hypermarket to Europe in 1963. A hypermarket is a mega-store, similar to that of a Wal-Mart. They started in small French towns, but by 1969 expanded to Belgium. In 1975, they opened their first store outside of the European continent, they had expanded to South America’s largest country, Brazil.

Carrefour’s strategy until 1998 was to grow organically. But since 1998, its growth has been fueled by acquisitions of other retailers.

Carrefour’s Financing Policy Analysis

The risk that a business' operations or an investment's value will be affected by changes in exchange rates. Carrefour is exposed to exchange rate risk because of foreign-currency exposure from imported goods. This risk was being hedged through forward contracts. The €13.5 billion of debt on the Carrefour books is 97% hedged in Euro currency. Carrefour has a large exposure risk to the Euro because of their hedging policy.

Questions from the Book

1. What is going on at carrefour?

• Carrefour is expanding through acquisitions

o This will require taking on debt

• Current capital structure

o Long-term debt

 97% of foreign exchange rate risk hedged in Euros

2 . why does the eurobond market exist? (or, is plentiful debt capital not available domestically?)