Carrefour SA, Europe’s largest retailer, jumped the most in three months in Paris trading on optimism that Chief Executive Officer Lars Olofsson’s plan to revamp stores and cut costs will reignite growth.

Olofsson, who took over at the beginning of the year, said the three-year plan will improve purchasing through a new computer system, as well as focus on boosting sales even if it means sacrificing profitability in the short term. Like other retailers, Carrefour has been fighting the economic slump by lowering prices.

The cost plan “goes way beyond market expectations,” and “should boost the bottom line substantially,” Natixis Securities analyst Claudie Casimir said in a note. “The market now has all the possible bad news at hand.”

The shares were up 1.56 euros, or 5.1 percent, to 31.98 euros at 12:27 p.m. Wednesday in Paris, the sharpest gain since March 12. Carrefour has added 16 percent this year after losing half its market capitalization last year, when ex-CEO Jose Luis Duran was ousted as sales worsened.

Catching up to Tesco

The cost-reduction plan includes 1.4 billion euros of savings from reducing inventory holding periods to 30 days from 37, the CEO said Tiesday. Carrefour is installing a new computer system in its French hypermarkets that will keep track of inventory levels and back-office data, catching up with competitors such as Tesco Plc.

Olofsson’s presentation recognized that “Carrefour’s issues lay mainly in France, Spain, Italy and Belgium,” Sanford C. Bernstein analyst Christopher Hogbin said in a note.

“The analyst day provided much greater clarity.”

The retailer also said it will invest as much as 500 million euros in discounts and marketing during the next three years to improve the perception of its pricing in France. It also plans to spend as much as 1 billion euros to redesign stores and simplify its corporate structure.

Carrefour is reducing the size of some of its largest stores and shutting others, while adding more fresh produce and cheaper goods. The company will also scrap its French Ed discount banner and convert the stores to the Dia brand.

The new CEO “has the right mindset,” JPMorgan Chase & Co. analyst Jaime Vazquez said Wednesday. “Without sales growth, you are dead. He has correctly identified the challenges and the opportunities. We like the new Carrefour Discount range and the more price-focused communication.”

Source: Bloomberg