Carrefour dispute with franchisees raises risk for shareholders, says activist

By Florence Loeve

PARIS (Reuters) - Rising tensions between French supermarket group Carrefour and its network of franchise stores in France could hurt the retailer's operational and financial performance, activist fund Whitelight Capital said on Monday.

Since taking the helm at Carrefour in 2017, CEO Alexandre Bompard has focused on converting stores in France to franchises to outsource costs and protect margins in a fiercely competitive market.

But some franchises are increasingly complaining of unfair conditions in the relationship. The Carrefour Franchisees Association (AFC), which represents 260 stores, said on Friday it was launching an alternative purchasing network named Project X, challenging Carrefour's supply chain.

"Carrefour must imperatively adapt its economic model to avoid a progressive erosion of its franchise network and a weakening of its supply chain," France-based fund Whitelight said in a statement on its website.

Whitelight, which says it holds an undisclosed stake in Carrefour, said the retailer must rebalance its relations with the franchisees as the tension is creating "structural risks for shareholders".

Carrefour could not be immediately reached for comment. Its shares were up 0.27% at 13.3 euros by 1435 GMT.

Whitelight Capital founder Kevin Romanteau declined to disclose the size of his fund's stake in Carrefour but told Reuters he wanted to increase it.

He said it would be "desirable" to obtain a seat on Carrefour's board.

The AFC has previously taken Carrefour to court, challenging the price at which the group sells franchisees products that are sold in their stores.

AFC vice-president Anthony Thebaud said on Monday he had not heard from Carrefour, adding he was "available" to talk.

"The franchise model is unbalanced, it is not sustainable," said Bryan Garnier analyst Clement Genelot, adding that any rebalancing would have a negative impact on the company.

(Reporting by Florence Loeve, writing by Dominique Vidalon, Editing by Dominique Patton and Tomasz Janowski)