Retailer Casino pushes for more profit growth, asset disposals

Key Points
  • 2018 operating profit 1.209 billion euros, up 18 pct organic
  • Targets at least 2.5 billion euros asset disposals by Q1 2020
  • Eyes 10 percent annual growth in French retail profit
Casino has seen a 'deep transformation' over past four years, CFO says

French retailer Casino, which is battling investor concerns over its high debt, vowed to boost profits and cash flow in its core French market and said it would dispose of additional assets under a three-year strategy plan.

Casino, along with domestic peers such as Carrefour and Auchan, faces intense price competition in its home market as well as challenges from online players such as Amazon which has made in-roads in the sector.

The company, which had its credit rating cut to junk by Standard & Poor's in March 2016, has embarked upon asset sales to reduce its debt and ease concerns over the financial position of both Casino and its parent holding company Rallye.

The plan focuses on profit growth through the monetisation of client data, savings from purchasing deals and a greater focus on E-commerce, organic food, convenience stores and energy services.

Casino targets 10 percent growth per year in trading profit for its French retail business between 2019 and 2021 and the generation of 500 million euros ($566 million) in free cash flow per year.

Shares in Casino rose around 1 percent as analysts welcomed the new plan and outlook. The shares have gained 25 percent so far this year, almost reversing last year's 28 percent fall.

"The remarkable bit is the level of detail and the long time period over which Casino feels confident to provide very strong guidance," wrote brokerage Bernstein.

Casino, which also controls Brazil's top retailer Grupo Pao de Acucar, set out those targets after it reported 2018 group operating profit of 1.209 billion euros, a rise of 18 percent on an organic basis, excluding tax credits, beating the company's own guidance for 10 percent growth.

A shopper enters a Casino Guichard-Perrachon SA supermarket in Paris, France, on Tuesday, Oct. 23, 2018.
Marlene Awaad/Bloomberg | Bloomberg | Getty Images

French retail operations alone achieved operating profit of 518 million euros, an organic increase of 15.7 percent.

Casino said on Thursday it was raising its goal for the disposal of non-strategic assets to at least 2.5 billion euros, to be achieved by the first quarter of 2020.

The company said it was doing this as it had completed a 1.5 billion euro asset disposal plan in January, ahead of schedule, and in light of indicative offers received for other assets.

New services

Casino already has a joint purchasing alliance with Auchan, German retailer Metro and France's Schiever.

It is also expanding its online offering through a deal to use UK online retailer Ocado's platform, while its Monoprix supermarket arm has also become the first French retailer to agree to sell groceries via Amazon.

It has also been looking to diversify revenue sources away from its core retail business in recent years.

Casino is already making money from data it holds through its 'relevanC' and '3WRegie' units and handles power and energy sales via its GreenYellow and Cdiscount Energie units.

Under the three-year plan for France, Casino aims to further reduce its exposure to the hypermarket retail format to 15 percent of gross sales by 2021 from 21 percent in 2018, while in turn opening 300 premium and convenience stores.

It is also targeting organic sales of 1.5 billion euros by 2021 against 1 billion in 2018 and wants to increase the contribution of E-commerce to its sales to 30 percent by 2021 from 18 percent.