French retailer Casino’s third-quarter sales beat market expectations and it said it was reaping the benefits of price cuts at its domestic business, which recorded its highest growth in more than four years.
The robust French performance helped counter weak consumer electronics demand in Brazil, its second-biggest market by revenue, and the effects of August bombings in Thailand. It was a rare piece of good news this year for Casino, where group profit fell 36 per cent in the first half.
The company also announced an expansion of its joint purchasing deal with unlisted peer Intermarche to cover more products as it seeks to generate savings by buying in greater bulk.
It shares, which have fallen by about 30 per cent in 2015, rose by as much as 9 per cent on Thursday.
Casino, which makes 55 per cent of its sales in emerging markets and controls Brazilian retailer GPA, said third-quarter group sales were €10.6 billion.
That represented a fall of 0.5 per cent, stripping out acquisitions, currency effects and excluding petrol, following a 0.4 per cent decline in the second quarter - but nevertheless beat analysts’ forecasts of €10.56 billion.
In France, Casino’s top market and where it has been cutting prices since 2013, same-store sales rose 2.4 per cent, the best performance since the second quarter of 2011, with customer traffic up 3.7 per cent.
The French business - which accounts for more than 40 per cent of group revenue - had reported an operating loss of €53 million in the first-half, weighed down by the cost of implementing the price cuts, notably at the Geant Casino hypermarkets and LeaderPrice discount stores.
Finance chief Antoine Giscard d'Estaing said Casino was sticking to a forecast that profitability would improve in France in the second half of the year.
Market consensus for 2015 group earnings before interest and tax (ebit) of €1.680 to €1.780 billion was “realistic”, given weaker Latin America currencies, notably Brazil’s Real, he said. That would compare with €2.23 billion in 2014.
With Casino's price cuts now largely completed, analysts focused on the expansion of the purchasing deal with Intermarche. "The ramp-up in expected synergies with Intermarche is one of the key drivers behind the rebound we expect in domestic earnings (from H1 2015 bottom) as price investments will no longer deteriorate profitability," said Raymond James analyst Cedric Lecasble.
Reuters
