Casino Revenue Advances at Fastest Pace in Two Years on Brazil

Casino Guichard-Perrachon SA, the French grocery retailer targeted by short seller Carson Block, reported second-quarter revenue that beat analysts’ estimates as Brazilian shoppers switched to its cheaper Assai cash & carry stores.

Sales totaled 9.97 billion euros ($11 billion), rising 3.8 percent on an organic basis, the fastest pace in two years, Saint-Etienne-based Casino said Wednesday in a statement. Analysts predicted 9.83 billion euros. The stock gained 1.5 percent in early Paris trading.

Growth was fueled by nearly 40 percent organic growth at Assai stores in Brazil, which account for about a third of Casino’s revenue in that market. The format added 10 stores in the past 12 months and like-for-like growth was in the high teens. As the Brazilian economy shrinks, shoppers have been shifting to Assai to make their reias go further.

“We have had a fantastic push from new stores there,” Chief Financial Officer Antoine Giscard d’Estaing said in a phone interview. The headwind from adverse exchange rates is easing, as the Brazilian real has been the best-performing currency this year, rising about 20 percent.

Casino has almost finished its divestment program to cut debt, and plans to sell a few smaller assets such as real estate, the executive said. The company has been 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 its biggest market by more than 1.5 percent.

‘Right Direction’

“The economic signs are pointing in the right direction” in France, Giscard d’Estaing said.

Block’s Muddy Waters, which began its attack in December, has said that Casino is using financial engineering to mask a deterioration of its core retail business and that owner Rallye has too much debt -- allegations that Casino has dismissed. Casino, which had its debt rating cut to junk by Standard & Poor’s earlier this year, has since completed the sale of its stake in Thailand’s Big C Supercenter for 3.1 billion euros as well as a Vietnamese business.

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