July 30, 2020 / 7:02 AM / 9 days ago

Lockdowns boost Casino food sales, but profit disappoints

PARIS (Reuters) - A pick-up in food buying triggered by coronavirus lockdowns extended a revenue bounce at French supermarket group Casino in the second quarter, but extra costs ate into profits, disappointing investors.

A man wearing protective suit and face mask waits in a line observing safe social distance to enter in a Casino supermarket in Nice, as a lockdown is imposed to slow the rate of the coronavirus disease (COVID-19) in France, April 14, 2020. REUTERS/Eric Gaillard/Files

Shares in the debt-laden retailer fell 11% in early trading, after the group said it could not provide an update on its financial outlook. It had suspended its 2020 guidance earlier this year.

Operating profit was down 15.3% in the first half of 2020 to 386 million euros ($453.63 million), and the group said extra staff bonuses and measures to protect employees in stores had added to one-off costs.

It posted an underlying loss of 87 million euros in the period, compared to a 12 million euro profit a year earlier.

Jefferies analysts said in a note that Casino’s performance was underwhelming, as margins in France declined and its debt level crept up despite a push to shed non-core businesses.

The group has so far sold 2.8 billion euros of assets, including several hundred Leader Price stores to German rival Aldi, and said it was working on more disposals to reach its 4.5 billion euro target, although it gave no details.

“Casino’s problem remains its debt levels,” said Gregoire Laverne, a fund manager at Paris-based Apicil Asset Management, which owns some Casino bonds. “It’s the most highly-leveraged group in the sector, and the macro-economic environment is not one that favours asset sales at the moment.”

Casino CEO and controlling shareholder Jean-Charles Naouri has been seeking to ease debts - and those of parent company Rallye, which was placed under protection from creditors in May 2019.

The company, which also controls Brazil’s Grupo Pao de Acucar, has benefited from strong demand in big markets such as France and Brazil, where lockdowns to fight the pandemic meant restaurants closed and households spent more at supermarkets.

“There was a very substantial shift from eating out to eating at home,” Lubek told reporters. “Things are reverting back to normal but there are still much higher average baskets.”

Daily orders online remained 50% higher than before the coronavirus lockdowns, the group said.

The retailer, said net revenue came in at 7.85 billion euros ($9.23 billion) in the period, down 7.5% on a reported basis as currency swings took their toll and fuel sales fell.

But sales rose 10.4% in April-June, excluding these factors and on a same store basis, spurred by strong demand in France and Brazil during coronavirus lockdowns, building on 6.4% growth in the first quarter.

Casino’s convenience stores in cities benefited as shoppers turned to local suppliers, and the group, which also owns the Monoprix and Franprix brands, said it would open more.

Its CDiscount consumer electronics business also reported higher revenues.

($1 = 0.8505 euros)

Reporting by Sarah White. Additional reporting by Sudip Kar-Gupta. Editing by Carmel Crimmins, Jane Merriman and Barbara Lewis

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