Shares in French supermarket operator Casino fell 14 per cent on Monday after the retailer warned that its annual profit would be lower than expected as the recent Covid-19 surge dented demand.
The heavily indebted group controlled by entrepreneur Jean-Charles Naouri said in a statement that earnings before interest, taxes, depreciation and amortisation at its French retail operation would not increase as it had earlier forecasted, but instead contract by 1.7 per cent to reach €1.28bn for 2020.
The company’s various chains, which include the upmarket, city-focused Monoprix and convenience-oriented Franprix, have suffered from the Omicron-driven surge in infections that caused France to impose restrictions including clamping down on international travel and requiring homeworking in December.
Casino said the French food retail market had “conjuncturally declined at a higher rate than expected” in the fourth quarter, down 3.7 per cent nationally, and down 5.6 per cent in the greater Paris region where it earns about one-third of revenues.
Casino’s woes also hit the shares of its larger rival Carrefour, which were trading down more than 5 per cent by mid-day on Monday.
“The combination of still-depressed tourist visits and a recovery in out-of-home food consumption late in 2021 was likely a toxic combination for Casino’s critical profit generators Monoprix and Franprix,” wrote Jefferies analysts in a note.
The profit warning “provides an early peek into what we expect to be a very tough 2022” for Casino, they added. “The combination of sizeable market share losses of recent years and a highly leveraged balance sheet puts Casino in a weak relative position.”
Even before Monday’s sell-off, Casino’s shares have underperformed in the past year to fall almost 19 per cent, compared with a 27 per cent rise for Carrefour, and a 13 per cent rise for the broader European food retailing sector.
The group has lost 1.2 percentage points of market share in France in the past two years amid the Covid-19 crisis, according to Kantar Worldpanel. It is now the sixth-largest French grocer with about 7.5 per cent share, far behind leaders Leclerc and Carrefour with 22.7 per cent and 19.6 per cent respectively.
Naouri, who controls Casino through a series of holding companies including Rallye, was forced to put all of them in a court-protected restructuring procedure in 2019. Known as a procedure de sauvegarde under French law, it is similar to a bankruptcy proceeding and gives Naouri multiple years to pay down debts.
Casino had planned to offload €4.5bn in assets to pay down its own debts as well as help its parent companies service theirs, and has already sold about €3bn worth. But further divestments, including a planned share sale at its ecommerce business CNova that was scrapped in October, have run into difficulties because of the Covid-19 crisis.
As a result, Naouri in October obtained a court extension on debts that Rallye was expected to have to pay in 2023, pushing them back to 2025.
Casino profit warning triggers sell-off in food retailer
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