Ladies and gentlemen, welcome to the Carrefour Analyst Conference Call. I now hand over to Alexandre Bompard, Chairman and Chief Executive Officer. Sir, please go ahead.
Good evening. I hope you and your families are well and safe. Matthieu Malige will take you through our financials for the first quarter, but I'm here today to address the most pressing topic for all of us, the current COVID-19 situation. Our thoughts are, of course, with those who have been affected. This crisis is impacting our colleagues and our customers, and we are protecting them by all possible means while ensuring business continuity. As of now, and in most of our geographies, the situation is a sort of in between. We are out of the emergency stage, but not yet out of lockdown, nor of course, out of the crisis. This means that we are still living in uncertain times. I'd like to provide some insights on what we have done so far at Carrefour to face this unprecedented crisis.
We had the advantage of having entered the crisis with two years of successful transformation behind us, and a far more flexible organization. This puts our people in the right mindset to embrace change. Since the outbreak, we have built on these strengths to adapt in real time to a rapidly changing situation. We ensured shorter decision-making processes. I had assembled an executive team that has a very complementary skill set, and the experience makes us proactive and quick. Meanwhile, our board of directors meets every week, ensuring that we have high level of corporate governance. We circulate the best practices of what we have learned in this crisis, starting with lessons from day one in February. Our global reach allowed us to save precious days of preparation and to take swift actions in all our countries.
At this point, all our measures are in place with four main priorities in mind. First, our top priority is to ensure the safety of our colleagues and customers. We have implemented strict safety rules since the outbreak, going even further than the instructions given by health authorities. We equipped our teams with masks and gloves and installed protective screens at the front of our checkouts. We enhanced cleaning routines in stores and warehouses. We introduced social distancing measures and regulated the entrance of our stores. These rules are essential for the proper continuity of our mission. This is why they are regularly audited in all our geographies. Beyond the rules, we want to salute the remarkable dedication that our employees are showing by looking after each other and looking after customers.
Second, as a food retailer in this crisis, we have a major responsibility, making sure that everyone has access to food. Our first course of action is supporting the food supply chain. We are working closer than ever with our suppliers, enabling us to continue functioning properly. We simplified our offerings to get more of the most popular products on shelves. We also simplified our logistics plan to favor shorter trips and direct deliveries. This is also a way of supporting our local agricultural communities with their seasonal products. Our second course of action is one of solidarity. We created dedicated services for medical workers and vulnerable customers, such as express ordering service with free home delivery, special hours in stores to do shopping, or free meal baskets. We accelerated our food donations and through our foundation, we devoted EUR 3 million to supplies for hospitals.
All these initiatives demonstrate our sense of responsibility. This social responsibility is also why our board of directors decided to reduce by half the proposed dividend for 2019 at EUR 0.23 per share, as a balanced answer between responsibility and fair remuneration of shareholders. I'm waiving a portion of my fixed salary, as is the group executive committee, for the two months that correspond to the peak of the crisis. To properly recognize the exceptional effort of those working in stores, drives, and warehouses, we awarded vouchers or one-off bonuses in all our geographies. This, of course, means payroll expenses are going up as our supply circuitry and protective equipment expense, but it is how we stick to our values and assume our responsibilities as a group in a period of severe crisis. Third, we are serving customers with dedication and care.
I said that we would devote a lot of energy to customer satisfaction in 2020. I must say that our teams have gone above and beyond. I'd like to say how very proud I am of them. So many more customer-friendly initiatives have emerged from this crisis. We froze prices on everyday products in our key countries. We opened new channels, new services, and new partnerships to respond to booming e-commercial demands. We saw many employees from our headquarters volunteer to serve customers, and our underground teams became more flexible in pitching where needed.
All these initiatives resulted in an above-market rise in our Net Promoter Score. We stand out as an essential brand according to many surveys. In France, notably, two weeks into the crisis, we already were in customers' top three most necessary brands. Through our purposeful actions, we are winning the hearts of our clients.
We are monitoring our activity very closely. We had a quarter of solid activity characterized by highly different phases and volatile consumer behavior. Matthieu will walk you through the detailed figures. I just have two remarks. In this crisis, our group is being tested, and it is responding efficiently. We are leveraging our strengths, being global and having a responsive team helps us confront the different challenges we face, and having a strong multi-format model helps us address the different consumption pattern we see. Looking at the future, I'd like to share with you some of my beliefs. I do not overlook the scale and severity of this crisis, which is still ongoing. We cannot predict what will happen. It is already clear that the crisis is intensifying existing trends. In fact, this whole crisis underscores how relevant most of our transformation was.
First, e-commerce and convenience stores, where we have been rapidly investing and expanding, are emerging from the confinement period as key formats. Second, the value proposition of our hypermarket and other discount formats will be further enhanced by growing concerns about purchasing power. Hypermarkets offer the highest degree of sanitary protection, thanks to the greater space, and they are a one-stop shop for families who want to limit their movement. I believe that this format will emerge from this crisis as a reassuring and convenient place to shop. Third, today's crisis highlights how crucial food security is and how much what we eat matters for our health. This will provide further impetus to Carrefour's leading role in the food transition for all and support our efforts to develop organic products on grounds and local producers. Four, the crisis increases the need for a sound financial structure.
Since 2018, we have exceeded our cost-cutting objectives and built a strong balance sheet. Since the outbreak, we have secured an even better liquidity position, as Matthieu will explain. Many initiatives that we started two years ago as part of our transformation plan will greatly matter in the coming months. We are still managing for this further crisis. It is already clear that we are living in a defining moment for our sector and beyond, one that will have lasting effects on our economies and societies. For the future, we are laser-focused on how the situation is evolving, most notably on customer behavior. At this stage, we will continue pursuing our transformation with even greater confidence in our actions and reaffirm all the objectives of the Carrefour 2020 plan. Thank you for your attention. I now hand over to Matthieu.
Thank you, Alexandre. Good afternoon to all of you. I am very happy to be with you today. I hope you are all well and safe. This Q1 was obviously atypical, marked by high volatility on the back of unusual consumption patterns and unprecedented lockdown measures. Q1 sales were up by a strong 7.8% like-for-like, reflecting a good commercial performance in January and February and a great execution by all Carrefour teams to respond to the peak in demand in March. The strong dynamic of like-for-like growth occurred in all our countries. Overall, the consumers' reaction to this pandemic was very similar from one country to another. How has the quarter played out?
What we can say is that this Q1 was marked by two distinct periods. First, in January and February, Carrefour continued to advance in its transformation plan with good sales and market share momentum and encouraging signs in terms of volumes and price perception. In the first two months of the year, like-for-like growth was plus 4.3%. In March, we recorded a strong increase in sales ahead of lockdown measures, with consumers making precautionary purchases, mainly in dry groceries and products with long shelf lives. All store formats and e-commerce benefited from this strong momentum in food. Traffic and baskets hit record levels.
Once the lockdown measures were put in place in the last days of the quarter, consumers turned to proximity and supermarkets closer to their homes at the expense of hypermarkets. Across all formats, the number of visits was lower, while the average basket increased significantly.
Food e-commerce continued to post strong growth. A few key consumption patterns are worth mentioning. E-commerce sales rose plus 45% in the quarter, with very high growth in March, when demand for e-commerce peaked. Non-food sales were down minus 3.5%, with markets particularly penalized, notably certain categories such as textiles, which were not considered as a priority. Public authorities in countries like Spain or Italy even closed certain non-food departments. Demand for organic products remained strong, with sales up 30% in the quarter.
Carrefour branded products progressed throughout the quarter as they respond to two sustainable market trends, the need to protect purchasing power and attention to food quality. Their penetration rate was up by two percentage points versus Q1 2019. Let's now look at our performance per country. In France, like-for-like sales increased by 4.3%, growing + 5.9% in food, while non-food was down 6.1%.
We saw growth in all of our formats. Like-for-like increased by 0.9% in hypermarkets. Underlying sales trends improved in both January and February versus previous quarters. Hypermarket benefited from precautionary purchases in March. The format clearly provides consumers with a broad offer, attractive prices, and the convenience of concentrating purchases in a single place. Supermarkets grew 8.1% like-for-like and benefited from their intermediate positioning, combining proximity and broad choice. Carrefour also strengthened its loyalty scheme with the new market loyalty premium program launched in January. This new loyalty premium recorded strong success. Convenience sales were up 11% like-for-like, highlighting a very strong momentum. Promocash activities were penalized by restaurant closings. Turning now to Europe. In January, February, growth in all countries improved sequentially compared to previous quarters. In March, our European operations also benefited from precautionary purchases ahead of lockdowns.
The region has been particularly affected by the pandemic, with very strict lockdown measures, including closures of most non-food categories in Spain and Italy. In Spain, like-for-like sales increased by 6.6%. The approach based on customer satisfaction was a key differentiator and resulted in a new improvement in Net Promoter Score. In Italy, like-for-like sales were up by 2.5%. With a strong presence in the north of the country that was particularly affected by COVID-19, Carrefour has capitalized on its multi-format presence. In Belgium, like-for-like growth was +6.2%. We resumed market share gains, including in the period preceding the COVID-19 crisis. In Poland and in Romania, momentum remained very solid, growing +8.8% and +9.7% like-for-like, respectively. In Latin America, which was impacted later than Europe by the pandemic, we continued to see very strong momentum.
In Brazil, Q1 sales were up 12.2% at constant exchange rates, with like-for-like growth of 7.6%. Foreign exchange had an unfavorable effect of -14%. Carrefour Retail posted sales up 8.9% on a like-for-like basis, notably thanks to strong momentum in food. Solid growth in e-commerce continued despite a slowdown in non-food. Q1 sales at Atacadão were up 7% like-for-like. The banner continued to expand with the opening of four new stores in Q1. Financial services posted a new increase in billings. Carrefour Banque reinforced its activity in granting credit during the quarter. In Argentina, where like-for-like was up 70%, strong commercial momentum continued, with traffic and volumes increasing continuously. Carrefour again acted in favor of consumers by freezing prices on 1,300 products. In Taiwan, sales rose +6% like-for-like. Effects linked to the pandemic situation were less marked than in other group geographies.
Carrefour Taiwan benefited from the integration of eight Wellcome stores in 2019, and successful commercial operations around Chinese New Year. As Alexandre shared with you, Carrefour is entering the current period strengthened by two years of employment of the Carrefour 2022 plan. Let me complement this analysis with a word on financial and cost discipline, as well as Carrefour's solid balance sheet. Over the past two years, we have revamped a number of processes and simplified our organizations. We have developed deep expertise in the transformation of processes with an industrial approach. We have also shown strong selectivity and productivity in our CapEx policy. This helps Carrefour reinforce its balance sheet. We now have one of the strongest balance sheets in the industry. Last month, we further increased liquidity with a bond issue for an amount of EUR 1 billion, with a maturity of over seven years.
The success of this issue attests to the great confidence of investors in the Carrefour signature. A few weeks ago, Carrefour Brazil signed a bank financing for BRL 1.5 billion over two and three years. The group has two undrawn credit facilities totaling EUR 3.9 billion, with a maturity in 2026. Carrefour's solid balance sheet is an important asset in the context of the fast-changing food retail sector, as well as in the face of the current economic environment. Let me now conclude. Even if it's, of course, too early to grasp the full extent of the crisis we are going through, we are continuously assessing the impacts of the COVID-19 crisis and its effects on the economy and on consumer purchasing behavior. As you understood, the orientations of the Carrefour 2022 Strategy Plan are very relevant in the current context and are reiterated.
We also confirm all operational and financial objectives. As far as our agenda for meetings with investors is concerned, we have decided, in the current context, to postpone to a later date the thematic event in Spain, as well as the Carrefour Brazil Investor Day in São Paulo. Thank you very much for your attention. Alexandre and I are now very happy to take your questions.
Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. The first question comes from Cédric Lecasble from Stifel. Go ahead.
Yes, hello. Can you hear me?
Yes, Cédric, very well.
Okay, good. Thank you for taking my questions. Hello to all the team. I have, actually, two questions. The first one to understand the potential stocking, de-stocking impact you've had with the pre-containment, post-containment. Could you help us maybe with current trading and tell us if current trading has normalized in April versus a lot of volatility in the weeks of March? The second question is in two parts. Did you see the same kind of behavior of the consumer for physical constraints into containments in all the countries with your hypermarket? Did you see a general pressure on traffic? The second part is, did this context lead you to activate all the services you were pushing to add service and add value to the consumer, like food deliveries, et cetera, all the services associated with your hypermarket and part of your omni-channel strategy?
What can you do today to bring back customers to the hypers when the containments end?
Thank you, Cédric. Let me maybe start with the second one. Well, obviously, different lockdowns in different countries. The level of constraints imposed to the populations has clearly varied in locations and also in time. The way that has impacted our hypermarkets, as I said in my comments, has varied, with some governments deciding to close down non-food. We have different types of hypers. Obviously, some big ones, which are located in shopping malls. These ones are clearly more difficult to be accessed in the lockdown situation. Other hypermarkets of smaller size, which have more of a proximity role. Very different performance throughout the geographies, and different relative strength and attractiveness for the customers, depending on the geographies.
You've seen over the past few quarters, a clear difference between the performance, let's say, of our hypermarket in Spain, which had a very solid performance, and in France, for instance, where it was a little more difficult. These underlying trends obviously are still here during the period. Yeah, but that's for the trend. Alexandre?
For the first part of your question on the consumption pattern, what you have to have in mind is the fact that, I would say the most prominent point of this crisis, and potentially linked to the lockdown, is the huge volatility and the huge unpredictability of the consumption model. To tell that a little bit differently, no week is really similar to the previous week or to the week after. Consequently, what we see in this crisis is that the key point to analyze and to be performant is the capability to have permanent assets that are capable to answer to different moments of this crisis. What we clearly see since the beginning of March is the fact of being multi-format is really a key asset when consumption trends change very rapidly.
Just before the lockdown, it was, of course, a moment of huge consumption, particularly in hypermarket. Just the days after the lockdown, when the lockdown was very strict, of course, the performance is better in supermarket or convenience, and you know we are clear leader on convenience. Food e-commerce has been outperforming during all the period, particularly after March. What we see is that the key point is that, and the fact to have this multi-format organization to have been capable to develop e-commerce capabilities, because of course, the level of demand on e-commerce is strong and growing for us all the time. To have been capable also to develop a performant and attractive Carrefour-branded products with organic products, because we clearly see that linked to purchasing constraints, the relevancy of Carrefour-branded products is strong.
Last of all, to have competitiveness on price, and it's probably a long-term also element. As you know, thanks to all what we have been capable to do on cost savings in the last two years, we have been capable to restore price competitiveness. I would say, of course, there are different weeks, but no week is really similar to the other one. The key point is to have all these assets and to be capable to accelerate on different formats according to the moment of the crisis.
If I may, how does April compare to January, February, if we exclude March?
Sorry, can you say that again?
Yes. Just about the contrasting and the way April compares to January and February, if we exclude the strong volatility in March, how have things settled down during this phase versus January, February, all formats together?
Well, today, we're already commenting Q1, Cédric. We'll have a discussion in July about Q2, if you agree.
Yes, I don't. Okay. Thank you much, Alexandre.
Thank you.
Thank you, Cédric .
The next question comes from Carole Madjo from Exane. Madame, please go ahead.
Hello. Yes, good evening. A few questions from me. First of all, you mentioned that the group LFL growth is 4% in the first two months of the year. Can you maybe share the LFL of the French supermarket for that period? Second question, beyond France, Poland, and Spain, what are the countries in which you gave some bonuses to the staff, if you can share that? Maybe the last question, as you mentioned, of course, the consideration is driving to higher costs. Maybe can you give us your thoughts on the consensus at this stage? Thank you.
On the first question, hi, Carole. On your first question on the French hyper like-for-like in January and February. What we said is that the trend improved. I think I said that in my speech. The trend improved versus previous quarters. Clearly, there's been an acceleration in March on the back of the precautionary purchases, but still an improving trend in January and February. On the bonuses to the staff, there is a number of, we disclose the amounts. There's pretty much the same approach in all geographies with a number of measures, be it cash vouchers, different things, to thank our colleagues for the impressive work that they have done at the time of the peak. On your fourth question related to the big margin. Well, as you know, we don't disclose on a quarterly basis, but what can we say?
There are clearly pluses, notably volume uplift, also minuses, of which circumstantial additional costs. In Q1, thanks to the 8% of growth, we have a positive operating leverage thanks to this increase in volume. Of course, regarding costs, we have several additional costs which are highly linked to the choice we have made to be very responsible during this crisis. It's costs related to the protection of employees and customers. Of course, equipment, new process, new way of working during this moment. Exceptional bonuses, I might just say one word on that, in all the geography and of course, mainly in France. Also the decision we have taken at the beginning of the crisis to be capable to create new services for the most vulnerable people, for S people and so on.
We have tried to work on that, be capable to open all these new services. Of course, they are not profitable, and that was not the choice we've made at this moment. All in all, as you understand, we have these pluses into the volume, and we have these exceptional costs linked to the choice of responsibility, of protection, of recognition for our employees.
Okay, thank you.
The next question comes from Clément Genelot from Bryan Garnier. Please go ahead.
Good evening, everyone. Just two questions from my side, if I may. The first one is linked to your pricing investment policy. I understand that in France, you have committed to stable prices. Does it mean that you are putting on all your investment policy, and especially in hypermarket? That's the first one. The second one is linked to your cost-cutting plan. I understand that throughout 2024, by the end of the year, you'll still get EUR 2.8 billion. Do we have to expect some kind of slowing down trend in H1 and catch up in H2? Of course, I guess that in H1, you are all focusing on the crisis and not so much on the OpEx control. Thank you.
Thank you, Clément. Well, on price investments, I think it's really a long-term strategy and policy that we have. It started two years ago. As we highlighted, that has continued in the course of Q1. We mentioned a few initiatives. One of them is the Prime Marché, the loyalty premium in the French supermarkets, granting a 10% discount on all fresh products every day. It's not a special promotion, and that has been going on through the crisis in March. We have also decided, and that's part of our investments, but also of the responsible approach and philosophy of the group in the current context, to freeze a number of prices. We commented that the indicator 5,000 private label products in France, which have been blocked, and that pretty much happened everywhere. This pricing investment strategy really keeps going and keeps developing.
On your second question relating to the phasing of the cost savings. You're right, we have confirmed our EUR 2.8 billion target on cost savings by the end of the year. It's a number that we increased in February. Well, I think we discussed that on previous calls. It's really a high number of initiatives in all our geographies. You're right, some of them may slow down, but we have other initiatives that are still working and progressing very well. No big seasonality effect anticipated. It's really a mass of local initiatives, and we have not taken our eye off the ball and from the cost-cutting initiatives in the current environment, as you can imagine.
Thank you.
The next question comes from Arnaud Joly from Société Générale . Sir, please go ahead.
Good evening, Alexandre, Matthieu, and team. I have three questions. The first one, you have a jump in your online grocery sales. I'm just wondering whether it helps you to improve the profitability of your online operations, and maybe if you can give some flavor on the level of services, in particular regarding the product shortages. My second question on French hypermarkets, I'm wondering what kind of initiatives you plan to relaunch traffic, let's say, in the coming weeks. Do you think that you will have to be much more aggressive on prices? Maybe the third question, when do you believe, or when do you plan to relaunch let's kind of normalize marketing and pricing policy? I think that over the last few days, you started to launch email by offering discounts and promotions in your hypermarket.
When do you plan to have a kind of normalized marketing policy? Thank you.
Thank you, Arnaud. First question on e-commerce. Just before discussing about the profitability of e-commerce, we tend to consider that on e-commerce, this crisis is an opportunity for us on e-commerce, because we clearly see that we managed to convert customers that did not use online shopping for food before the crisis. Of course, it's a huge acceleration, and it's a huge opportunity for us to present to all our customers the different services that we have been capable to develop the last two years, of course, Drive, pedestrian Drive, delivery, express delivery. As you know, during all this crisis, we have tried to continue to propose new services such as the essentials, for example, in Paris. We have tried to be capable to continue this service while in a certain number of countries our competitors have stopped due to the high level of demand.
We have tried to open additional delivery and pick-up slots to communicate with the customers on our home page about the difficulties we have to fulfill exactly the initial proposals. We have created virtual waiting lines. We have given seniors and fragile people priority. We have created the opportunity to order by phone. It's really a complete overall program that we have developed. On profitability, of course, e-commerce has not become, in one day, profitable for all the retailers. As you know, e-commerce economic model is the margin plus variable costs minus fixed costs, so fixed costs are fixed. Due to the high level of increase in volume, we have seen a positive impact on variable costs margins.
Of course, it's a positive tendency to see the volume, and I tend to consider that it will be for a long time moment that we have been capable to convert new customers on that. On the hypermarket, if you may authorize, I would say to share my personal conviction. Contrary to what sometimes I read, I do believe that the hypermarket value proposition would be attractive as soon as the lockdown is eased, because we clearly see the three potentials for the hypermarket. First, I think that we all share here that it's obvious, it's certain in all our geographies that purchasing power is going to be a major concern for customers in the coming quarters in this economic context. As you know, hypermarket is the good answer to this price constraint.
I don't see why and how this purchasing concern, this purchasing constraint would not favor the performance of the hypermarket. Second, I think that people in this context and particularly in the sanitary transition context, they will look for efficient shopping with all under the same roof. Hypermarkets are unique one-stop shops. Consumers want to shop all at once rather than queuing up to access multiple stores. I'm convinced that the efficient shopping will be favorable to the hypermarket. Last, I visit many stores, of course, in the beginning of the crisis, and you clearly realize that hypermarkets make it possible for customers to shop with a safer shopping experience as physical distancing can be implemented in large size stores. Clearly, it is a third advantage.
When you gather these three advantages, you realize that when the lockdown will be eased, that would be a good value proposition for the hypermarket. On your last question, it's not so simple to answer about this type of question because as you probably realize, the level of uncertainties about next weeks, about next months, remain very strong. It's quite difficult to completely know what would be the situation in May, in the beginning of June, in June. All the teams in France, all the teams in all the countries, try to reassess the options to think about what could be the good moment to have a more normalized price and marketing policy. We adapt that each week, and we don't have any visibility, of course, like everybody, about what would exactly happen when the lockdown would be eased in the different geographies.
Thank you very much.
The next question comes from Fabienne Caron from Kepler Cheuvreux. Madam, please go ahead.
Yes, good evening. Two questions from my side. The first one on the French supermarket. You performed in line with the market, which I personally found to be disappointing, looking at performance of the independents in this scene, which were much stronger. What is your analysis? How come you didn't gain market share in supermarket? Did you have some issues with logistics or stock ups, any help will be quite on that side. On the French hypermarket again, we've seen a Sony through their cloud having bad for April, assuming it remains the same for May. Do you believe Carrefour is strong enough to offset potential a weak like-for-like install for two months? Thank you.
Good evening, Fabienne. Thank you for your questions. On the first one, regarding the supermarkets, we've not noticed any particular underperformance. However, there's a number of trends which are going on in our French supers, which we should all have in mind and which are basically the high level of investments that we are putting into these formats. First of all, we have a strong progression of the private label, in this format. We clearly go faster than the markets in increase of penetration of private label in French supers.
That clearly has a dilutive impact on our top line. You may remember that starting from June last year, we launched a high number of price investments with the and also investments on national brands to reduce and be more and more competitive. We have not circled on these investments yet. They are still impacting our top line.
We also have a number of works currently going on in a number of our supermarket stores. Although we remain very conscious of not over-investing, having modern concepts and modern store layout is important for our customers, we are investing. Maybe last point, which is more related to the crisis. We've been very strict in implementing all the measures relating to social distancing. This is probably why you may have seen some lines outside of our stores. Again, I think we emphasize that quite strongly tonight. The protection, the safety of the health of our employees and customers is very, very high on the priorities list. We don't play with these rules that may have penalized us here or there if some direct competitors were less stringent on these rules.
On your second question, Fabienne, on the hypermarket, I think, sincerely, that it would not have any sense to project the performance of the hypermarket in May. Let me try to synthesize that. The lockdown is very strict. The lockdown is accompanied by a closure of the totality of the shopping malls, when people don't reduce very strongly their physical move, the hypermarket is suffering, and it's clearly the situation the days after the lockdown decision. Things begin to evolve day after day, and we cover that, we see that the performance of the day-to-day hypermarket begins to increase and to improve. Now we enter, as you know, in May, in a new moment in France, and because we're talking about France, you've probably seen that all the modalities of the deconfinement have been announced today.
We clearly see that the capabilities for the consumers to move in a 100 km is now absolutely free. Of course, it means that with all the advantages of the hypermarket that you already mentioned, there are this opportunity. Additionally, of course, there is still the capability to capture share of wallet in the out-of-home meals. When you have all these elements, it's really impossible to tell and to extrapolate the performance in May. As I mentioned previously, the performance evolved very strongly week after week. The key question for us is to be capable to have the best performance, the best multi-format organization to capture the consumption patterns where they are, week after week.
Okay. Just to make sure regarding promotions, when will the new sets start again to be distributed in France?
Well, I think, Fabienne, that that was answered by Alexandre previously. It clearly depends on how the market evolves, and as you know, it's quite a sensitive topic, so we will not develop this any further.
Okay. Thank you. The next question comes from Val Tony from Bestar. Sir, go ahead.
Good evening. I have just one question, please. Will the employee bonuses be classified outside of recurring costs?
Let me come back on these exceptional costs. You're right, it's a very particular quarter. I will not come back on what Alexandre said. Clearly very high volumes and reflecting that exceptional cost, a number of them coming from exceptional bonuses to the employees in France and outside France, and also exceptional logistics costs to cope with the increase in volumes. Overall, I would say that net of these exceptional bonuses to employees, the Q1 profitability is close to our initial expectations, which means that excluding these bonuses, it's ahead of our initial expectations. On the accounting treatment, although these bonuses are clearly exceptional in nature, it's too early to confirm what will be the accounting treatment for that at the end of June. It's a matter that we need to discuss with our auditors later in the quarter.
Okay, thank you.
The next question comes from Maria-Laura Adurno from Morgan Stanley. Madam, go ahead.
Thank you very much for taking my question. I actually have two. The first one, coming back to the cost, I was just wondering if there are any areas in which you're actually seeing cost inflation. The second question which I also had, with respect to non-food, for instance, here in the U.K., we saw some of the suppliers canceling or managing differently their non-food orders with the suppliers. Just wondering if you could shed some light on this. The second question, what you just mentioned. You said that including bonuses, the monthly operating profit is in line with your expectations. Thank you.
On inflation on food, if it's your question, it's on cost. We don't see any particular elements in this quarter, of course, except all the exceptional costs we've mentioned. On the cost, on the price and on food, as we mentioned, that there's no inflation in this quarter. There are a certain number of prices that have been negative, and they have been compensated by an increase of prices of vegetable and fruits, which are clearly related to the choice we have made to favor and to privilege local or national producers.
On non-food, of course, it has been a very particular quarter, and particularly after March, and it was not the priority of our customers and not the priority of ourselves. You probably know that a certain number of countries, such as, for example, Italy or Spain, we even had to close non-food categories due to local regulation.
In terms of trends, customers were more focused on fulfilling basic food needs while limiting time outside the home. Of course, as we have seen, the textile has been highly impacted on the other end. Depending on the country, particularly in the first day after the lockdown, the consumer electronics or appliances departments were more positive. Overall, of course, this moment is negative for non-food.
Do you have a last question, but the line was bad, Maya, or do you mind repeating that?
Yes. Sorry. It's just that I wanted to check that I had heard correctly. You said that once you operate in profit, including the employee bonuses, was in line with your expectations. Is that what you said? Thank you.
Yes, you understood well. Net of these exceptional bonuses, the Q1 profitability is in line with our initial expectations.
The next question comes from Rob Joyce from Goldman Sachs. Go ahead.
Thank you very much for taking my questions. I've got three. To clarify that final point you made there, you're saying that after the bonuses, but also including the increased volume operating leverage, you're trending where you expected to be in Q1 prior to the outbreak of the COVID-19. The second one is just on the non-food side of things. If you could say whether the trends you're seeing there would impact your longer-term thinking on non-food in hypermarkets, and whether you could just remind us what percentage of sales those textiles were in the French hypermarkets last year. The final one from me, just in terms of the, again, thinking longer term, you mentioned there's quite a distinction between the large hypermarket performance and some of the more local hypermarket performance.
Could you give us an idea of, in France, what percentage of sales last year in the hypermarket division came from those larger hypermarkets versus what came from the more local hypermarkets? Thank you very much.
Good afternoon, Rob. Thank you for your questions. Well, I think you got it right on the profitability. Let me repeat that. The net of these exceptional bonuses to employees, the profitability is close to our initial expectations, and that obviously increases all the other exceptional costs, including logistics costs due to the high volumes and also all the costs associated with protecting our employees and customers.
On non-food, I wouldn't consider that the performance since the beginning of March could be extrapolated in a midterm perspective for, I would say, two essential reasons. The first one is related to the fact that, of course, you understand that the mood of the customers were not at all to a certain number of categories in all the geographies. You mentioned textile, of course, it's a symbol of that. It's the first reason in favor of we. The second, I would say, is the fact that we were not ourselves focused on the performance on the non-food during this quarter. The obsession of the team was to be capable to fulfill our mission on food, to give access to everybody, to manage the supply on France one. I wouldn't tell that it was the best moment for the non-food.
The third element is related to what you said about the hypermarket. Clearly, we anticipate that the customers would try to have an efficient shopping after this crisis. Clearly, we do think that the willingness to queue in many stores would not be so natural, and the fact to have everything under the same roof could be an opportunity, of course, if we are commercially attractive. I do consider that in the next quarters, we have an opportunity to reinforce our performance there. Not to say that we know that a certain number of non-food players could be in different positions than they were before the crisis.
I do think that we potentially have an opportunity for Carrefour in the next quarters compared to what we have been capable to deliver since now. On your last question regarding the split, well, I don't have it on the back of my mind in France between local role versus a more regional role. I think across our various geographies, you see differences. For instance, I think Belgium is quite interesting and despite the comments of Belgium on the quarter, we have some relatively smaller hypermarkets in Belgium, 6,000 sq m, I think, in average. You know it's probably a more dense country in terms of urban organization, and so they have more of a proximity role. Different trends across countries, clearly, and also inside France.
Thank you very much. Sorry, one quick question I meant to ask. Tesco flagged that they expected reduced profitability in their bank on the back of lower interest income and also some impairments there. I'm just wondering on your financial business, is there anything we should be aware of on that side of things?
Well, it's a normal period to ask the question and focus on risk in a banking activity. We have no specific alert at the end of March on the basis of what we see. No particular concern, but given the economic dynamic, we're clearly more cautious, as I commented on Brazil, the policy on granting credit is more stringent. For now, a few weeks, we reinforced a number of teams to collect credits. It's basic protocols in these businesses and no specific concern to date.
Okay. Thank you very much.
Well, thank you very much.
Thank you very much.
Bye-bye. Have a nice evening.
Goodbye.
Thank you so much.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.