Casino to Focus on France, Brazil and Debt After Profit Declines

  • Retailer gives more detail to counter claim it's opaque
  • Casino has gained market share in France this year, CFO says

Casino Guichard-Perrachon SA sought to counter short seller Carson Block’s claim that it is opaque by laying out plans to limit the impact of a weak economy in Brazil while providing forecasts for improved profitability this year in France, the grocer’s largest market.

Casino will expand its premium, convenience and discount stores in Brazil to address changes in consumption trends, the Saint-Etienne, France-based company said Wednesday after reporting a 35 percent drop in 2015 profit. The retailer also said it’s aiming to boost gross margin in France by more than 100 basis points, aided in part by sourcing agreements with rivals Intermarche and Dia, and increase same-store sales in the country by more than 1.5 percent.

Casino is selling assets in Asia and Latin America to cut debt, while focusing on price and convenience at home as it competes for growth amid weak consumer spending. The company in February agreed to sell its stake in Thailand’s Big C Supercenter Plc for 3.1 billion euros. It also plans to dispose of its business in Vietnam and close sites in Ecuador and Panama.

Overall, the commentary on France “reassured but an absence of guidance on group Ebit reminds that visibility is low,” said John Kershaw, an analyst at Exane BNP Paribas.

Muddy Waters

Casino shares fell 1.3 percent to 47.06 euros at 3:55 p.m. in Paris. Before today, the stock had slumped 45 percent in the past year, compared with a 12 percent drop in the Stoxx 600 Retail Index. The stock has jumped 11 percent in 2016.

Carson Block’s Muddy Waters began its attack last year, contending that Casino is using financial engineering to mask a sharp deterioration of its core French retail business and that shareholder Rallye has too much debt, allegations Casino dismissed. Block took aim again on Tuesday, saying the company inflated earnings by claiming more profit from property transactions than it should have.

Casino Chief Executive Officer Jean-Charles Naouri declined to answer questions on Block, saying “now isn’t the time or the place to respond.” He said his strategy of rotating assets in the past decade has helped strengthen Casino’s profile. He also announced the creation of a private property fund in Colombia, aiming to raise about $200 million.

Trading profit declined to 1.45 billion euros ($1.6 billion) in 2015, Casino said earlier Wednesday in a statement. Analysts predicted 1.51 billion euros, based on the average of 18 estimates compiled by Bloomberg. Trading profit fell in France, hurt by price cuts, though the business recovered in the second half, with profit up by 34 percent.

The first two months of 2016 also have been “very good” for the French business, and Casino’s market share in the country has increased, Chief Financial Officer Antoine Giscard d’Estaing said on a conference call with journalists. The company reiterated the financial targets for its French operations this year, including a trading profit of 500 million euros.

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