(FORTUNE Magazine) – Carrefour," says Jean Anthoine with sudden intensity, "is a mission." On this warm, late-spring day in Warsaw, Anthoine, who directs the French retail giant's chain of Polish supermarkets, is on the road preaching the gospel. We're pulling into the parking lot of a new Carrefour in Warsaw's northern outskirts, and already Anthoine has spotted a problem. A car alarm is ringing, so Anthoine phones ahead on his mobile to Jean-Pierre Piat, the supermarket's manager, and suggests that he send someone to investigate. Five minutes later Anthoine and Piat have begun their store inspection and are staring unhappily at a display of irons. Something about the irons looks wrong--very wrong. Anthoine fusses and frets, and eventually shifts the appliances 30 degrees to ensure that the control buttons are fully visible. "Perhaps you could have a word with the responsible assistant," he murmurs to Piat, who is equally irritated by the lapse. "Carrefour," explains Piat solemnly, "is not Club Med."

So what exactly is Carrefour? In layman's terms, Carrefour--which means "crossroad" in French--is the world's second-biggest retailer after Wal-Mart, with total sales last year of $46.8 billion, net profits of $1 billion, and a market cap in early June of around $47 billion. The question is whether Carrefour is something more than just a collection of really big stores--whether, in fact, we're talking about a company that might one day be mentioned in the same breath as the Bentonville, Ark., colossus.

At first glance, Wal-Mart's numbers provide their own, crushing answer. Consider: Last year Wal-Mart registered total sales of $165 billion and net profits of $5.4 billion. Its market cap is more than five times Carrefour's. Wal-Mart is the dominant player in North America, which Carrefour abandoned seven years ago after flopping in Philadelphia. Set against those facts of life, Carrefour's expansive (and vague) talk about aiming to "win the global commercial battle" seems like so much hot air. But you don't have to believe that Carrefour will one day topple Wal-Mart as the retail industry's super-heavyweight--and Carrefour is careful not to make that forecast--to understand why a Wal-Mart spokesman talks about the U.S. company's "high regard" for its French rival.

For a start, Carrefour is undeniably better than Wal-Mart at certain aspects of retailing, as Daniel Bernard, the French group's 53-year-old chairman and chief executive, is keen to point out. "They [Wal-Mart] learn from us in fresh food and merchandising," says Bernard, an exuberant retail maestro who wouldn't look out of place serving behind one of his food counters.

Carrefour's most significant edge on Wal-Mart, though, is the French group's commanding presence in markets where the Americans--late arrivals on the international retail scene--are either at the startup stage or have yet to plant their flag. "Carrefour is the world's most successful international retailer," says Jaime Vasquez, an industry analyst at Salomon Smith Barney in London, adding, "Wal-Mart has no track record outside North America." Not quite. Wal-Mart is well ahead in Mexico and has made two plays in Europe, buying Germany's Wertkauf and Interspar retail chains in 1998 and scooping up Asda, Britain's third-largest supermarket group, for $10.7 billion in July 1999. (Carrefour would love to enter both Britain and Germany, but has so far failed to identify a suitable takeover target.)

Everywhere else on the global retail map, it's Carrefour that sets the pace. Not surprisingly, it's the top chain in France, where the group's 4,000 stores (Wal-Mart has none) account for almost 30% of the retail market. And following Carrefour's takeover of rival French group Promodes last August, it is also the No. 1 retailer in Spain, Portugal, and Greece, and second in Italy (there's no Wal-Mart in any of those countries either).

So what's the problem? First of all, no one likes having Wal-Mart looming in the rear-view mirror. The U.S. group has signaled its intention to break out of its North American bastion and--true to its take-no-prisoners style--conquer the rest of Planet Retail. That's no idle threat. Wal-Mart's killer weapon is its unmatched computerized sales and distribution system, which should give it an edge wherever it operates.

And second, Carrefour is not in the best fighting trim. Since November its share price has fallen more than 30% from its post-merger peak, to around $72. To suspicious types, that makes it look like a possible tasty takeover treat.

Who would want it? Well, there's one retail giant that is a late (but ambitious) arrival in developing markets, admits to being weak in food retailing (in which Carrefour is world-class), is invisible in France (but would like not to be), and has deep pockets. "For Wal-Mart, Carrefour is the ideal target," muses Laurence Hofmann, an industry analyst at Societe Generale in Paris. "Wal-Mart's investments in Germany and Britain can't be justified [without] opening a third front in France." Hofmann adds that Carrefour is doubly vulnerable, because the group's founding families and their allies control only 25.1% of the voting rights, not enough to block a hostile takeover. A Wal-Mart spokesman declined to discuss such speculation. But if you were Bernard (who also doesn't discuss M&A rumors), you'd want to see that stock price rise as soon as possible, as a firewall against a potential Wal-Mart strike.

Of course, sometimes the best defense is a good offense. Carrefour could keep Wal-Mart at bay by doing some shopping of its own. In particular, there's that yawning American void in the Carrefour global portfolio still waiting to be filled. So which U.S. retail chains could be in Carrefour's sights? When FORTUNE met Bernard in mid-May, Paris was buzzing with speculation that Carrefour was poised to bid for Kmart. Hofmann also names Meijer and Target as potential U.S. takeover quarry, although neither group has Kmart's national reach. What's clear is that the chances of Carrefour's mounting a transatlantic raid increase with every rumor that Wal-Mart is coming to France.

So it's hardly the most convenient time for Bernard to lose his salesman's touch with the customers who matter most--Carrefour's shareholders. The worst damage was done March 30, when Bernard told Carrefour's shareholders at their annual meeting that he expected earnings growth of about 20%. Most analysts had been forecasting growth of at least 25%, based on two projections made by Carrefour at the time of the Promodes takeover: First, that the group would double net profit by 2002 and, second, that the deal would yield cost savings of $546 million. Bernard is sticking to those numbers, but analysts like Vasquez are concerned that they don't add up.

The doubts begin with Carrefour's Internet strategy, and in particular the company's three-year plan to invest more than $900 million in ISPs and portals in 15 European, Latin American, and Asian countries. "Carrefour's business-to-consumer strategy is much more ambitious than its competitors'," cautions Hofmann, who warns that the company could be risking online overstretch by trying to be all things to all people. Bernard doesn't just want to sell groceries online. He wants to establish Carrefour as a major e-commerce player, offering everything from financial services to videos while attempting to channel customers through a series of ISPs in which Carrefour will hold a stake. Bernard stresses that he'll invest the money with strategic partners, and that in any case it represents only 10% of Carrefour's projected capital expenditure over the next three years. But according to Vasquez, if that $910 million is included in Carrefour's forecasts (which it isn't), then earnings growth this year will be dragged down to 15%.

There are other worries, such as the possibility that Carrefour's integration with Promodes could lead to a slowdown in Bernard's ambitious global store-opening program, which envisages the launch of at least 55 so-called hypermarkets this year, including 40 in Asia and Latin America and 15 in Europe. (In Carrefour-speak, a "hypermarket" is the equivalent of a Wal-Mart SuperCenter.) Bernard is adamant that the store-opening program--which also includes 120 smaller supermarkets and 365 low-cost discount outlets--is still on track.

Bernard also rejects criticism that Carrefour screwed up when it reported $465 million in financial charges for this year--60% more than had been predicted. Yes, says Bernard, Carrefour didn't anticipate the rise in Euro-zone interest rates or the length and depth of the Latin American downturn, and yes, the group's debt burden is "bigger than expected." But no, "we do not suffer." That seems hard to believe--and the markets clearly don't.

None of that, however, diminishes Carrefour's reputation as one of the world's finest retailers and one that has a good chance of growing its way to superstar status. And for that, Bernard can take much of the credit. A cosmopolitan maverick among French business leaders, Bernard made his name in the 1980s running the French division of Metro, the German retail giant, before moving to Switzerland to head the group's international operations. For a Frenchman to rise so high in a German corporation was "unusual," admits Bernard; even more remarkable is that he was eventually anointed heir apparent to Erwin Conradi, Metro's chairman. He gave that up in 1992 to become chairman of Carrefour, following the departure of Michel Bon, who now heads France Telecom.

When Bernard is not at the group's headquarters in Paris, he is either with his family (he has six grandchildren), collecting English roses for his garden, or listening to the Wagner operas he adores. "I consider myself, really, as international," he says, but "of French culture." That pretty much sums up the company he heads. Carrefour was born in 1959 in the southeastern city of Annecy, close to Switzerland, when two brothers in the grocery business, Jacques and Denis Defforey, teamed up with Marcel Fournier, a department store owner. Fournier was an oddity among France's insular postwar shopkeepers, having visited the U.S. and marveled at the supermarkets that had begun to sprout in the suburbs. In 1962, at Fournier's insistence, the Defforeys also made a research trip, to the shopping malls of Dayton, Ohio. By the time they returned, they were converts, and they began to establish Europe's first chain of hypermarkets.

Two things accounted for Carrefour's success: an obsessive attention to detail and a knack for designing stores to meet local tastes. The company's hypermarket at Montesson, a western Paris suburb, is a massive, 13,000-square-meter emporium that is as long (but not quite as wide) as a soccer field. Okay, this brand-new store is something of a showcase for Carrefour, but what you see at Montesson is broadly what you get at any Carrefour around the world.

Bernard, like the legendary founder of Wal-Mart, is absorbed with the detail of retail. "I do not interfere," he declares proudly, summoning Gilles Bozet, the Montesson manager, to a wall chart that records the previous day's customer tally. Oh, really? Bernard wants to know, only half-jocularly, why yesterday's checkout transactions were only 12% more than the previous day's. As we proceed round the store, Bernard picks up stray pieces of litter, fusses over the TV and video-machine display, and purrs with satisfaction at the freshness of the fish. It's a retail cliche, of course, that any successful supermarket chain has to focus relentlessly on the temperature of the freezer compartment and whether the jam labels are facing the right way, because profit margins are paper-thin. But Carrefour may well be the best at what Bernard calls the theatralisation of shopping--a fancy word for making sure your products look good.

But it's Carrefour's prowess in developing markets that really sets it apart from Wal-Mart. True, Carrefour's Latin American and Asian stores accounted for only 12.6% of the group's 1999 sales. But if you believe--as every major international retailer does--that countries like Brazil and China represent huge opportunities for growth, then Carrefour is the global player to watch. In China there are 22 Carrefours--spread across nine major cities--compared with Wal-Mart's eight. And in Brazil the French group is beating the pants off Wal-Mart. With decades of local experience and 20% of the market, Carrefour was well and truly entrenched by the time the boys from Bentonville finally showed up five years ago in Sao Paulo. Back then Wal-Mart thought it had stolen a march on Carrefour when it suddenly slashed prices on selected goods. The same day, Carrefour operatives materialized at the entrance to the Wal-Mart parking lot, distributing fliers announcing even steeper markdowns on the same range of products. And Wal-Mart stumbled when it imagined that shoppers in the world's premier soccer nation would scramble to buy American-style footballs. They didn't.

Carrefour steers clear of developing markets where sustainable growth and--just as important--a sound legal framework don't exist. Case in point: Russia, from which the company pulled back after an extensive feasibility study in the mid-1990s. Even in less challenging markets, Carrefour never plants its flag without at least a year's grassroots research. The hard work doesn't stop once the company is on the ground. Every Carrefour store in the world is required to conform to a limited range of design blueprints; so, for instance, you'll find the same signature white tiles and broad shopping aisles (to keep shoppers from feeling cramped) whether you're visiting a Carrefour hypermarket in Warsaw, Taipei, or Sao Paulo.

What Carrefour puts in the stores, however, differs by location. At least 90% of the goods on display at Carrefour stores in developing markets are locally sourced, because, as Bernard explains, "retail is the image of the country in which it lives. You have to adapt your food and other products to the local culture." So in Catholic Poland, a priest blesses the latest Carrefour hypermarket at the ribbon-cutting ceremony, and there's a special religion section featuring Bibles, candles, and primers for children preparing for their first communion. In China, Carrefour takes care to chop vegetables vertically--not laterally--so as not to bring bad luck to superstitious shoppers.

The planning extends to Carrefour's selection of joint venture partners, which are always required to play the junior role. When Carrefour arrived in Taiwan in 1989, for example, it hooked up with President, the island's leading food retailer. The result: Carrefour, which has 59% control of its Taiwanese subsidiary, is the national market leader, with sales of around $900 million in 1998 (the last year for which figures are available). Meanwhile, President has become a key strategic partner for Carrefour on the mainland. Compare that setup with the unhappy power tussle between Wal-Mart and C.P. Pokhand, a Thai retailer, for control of their fifty-fifty joint venture in China. The dispute ended in 1996 with both sides agreeing to go their separate ways.

The question now is whether Carrefour can survive its current stock market blues and fend off the international threat from Wal-Mart and a host of aspiring worldwide retail chains, such as Tesco and Metro. Carrefour may be trouncing Wal-Mart (so far) in developing markets, but it is a long way from being the finished global article. The company must continue to open well-run stores around the world while keeping its Internet expansion costs in line. But in this supremely difficult global game, you shouldn't bet against the detail-obsessed Mr. Bernard.

FEEDBACK: rtomlinson@fortunemail.com.