Shares of French supermarket group Casino tumble after profit warning

  • Casino is now targeting a 1.7% drop in EBITDA for French businesses in 2021
  • The group announces a food distribution market down 5.6% in Île-de-France in Q4
  • Casino shares down 13%, Carrefour shares down 5.7%

PARIS, Jan 31 (Reuters) – Shares of supermarket group Casino tumbled on Monday after the company slashed 2021 profit outlook for its retail business in France, sparking concerns among investors over its ability to increase its cash flow in a difficult domestic market.

Casino blamed the deterioration on a sharper-than-expected fall in the French food market in the fourth quarter, particularly in the Paris region, where it has a large presence through its high-end Monoprix stores, a key contributor to profits.

By midday, Casino shares were down 13%. Its woes weighed on its big domestic rival Carrefour (CARR.PA), whose shares also fell 5.7%.

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Analysts at investment bank Jefferies said they will now focus on “how earnings pressures translate into cash flow and leverage,” with Casino reporting its annual results Feb. 25.

The group, which had previously forecast higher profits this year in France, said it now expected a 1.7% drop in earnings before interest, tax, depreciation and amortization (EBITDA) from its retail in France in 2021 at around 1.28 billion euros ($1.43 billion). .

Jefferies analysts pointed to Casino’s heavy exposure to convenience stores in city centers, particularly in the Paris region, where the company said food sales fell 5.6% in the fourth quarter.

“The combination of continued depressed tourist visits and a recovery in out-of-home food consumption in late 2021 was likely a toxic combination for Casino Monoprix/Franprix critical profit generators,” they wrote.

In November, Casino announced that its sales in France had fallen by 4.3% in the third quarter after an 8.4% drop in the previous three months, hit by a drop in tourist traffic in the Paris region due to the COVID-related travel restrictions. Read more

JPMorgan analysts said in a note that the update “is expected to imply further mid-single-digit revisions to current expectations.”

Pointing to Casino France’s “deteriorating outlook”, they said that because the group was “predominantly upmarket”, it was exposed to competition from discount and hypermarkets during an economic downturn.

“We view Casino’s issues as primarily business specific and see no risk to Carrefour’s guidance at this stage,” they added.

($1 = 0.8953 euros)

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Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta and Jan Harvey

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