By Scott Kanowsky
Investing.com -- Shares in Casino Guichard Perrachon SA (EPA:CASP) dropped on Friday after the French retailer reported lower-than-anticipated income in 2022 and analysts raised questions over a potential combination with smaller rival Teract (EPA:TRACT).
Trading profit during the 12 months to the end of December slumped by 6% compared to the prior year to €1.12 billion, missing Bloomberg consensus expectations of €1.18B.
Casino, which is controlled by businessman Jean-Charles Naouri, said returns at its core French businesses dipped to €421 million, down from €479M in 2021, reflecting a pullback in consumer spending in response to a recent spike in inflation.
Consolidated net sales at its Cdiscount e-commerce division also decreased by more than a fifth, as a post-COVID slowdown in online shopping.
Net debt - a major source of investor concern that Casino has vowed to address - rose to €6.4B at the end of 2022 from €5.9B on the final day of the previous year. The uptick was the result of higher debt at Brazilian supermarket chain Assai, the company added.
Casino reaffirmed its plan to carry out the final €400M of its ongoing €4.5B asset disposal plan in 2023, partly through the sale of some of its operations in Latin America. It flagged earlier this week that it had started to explore a possible sale of Assai for €600M as well.
On Thursday, Casino announced that it had entered into exclusive negotiations with peer Teract over a tie-up, although few details have yet to be revealed about the valuation of the new entity or the amount of debt it would carry. About €500 million in equity will be injected into the venture, the firms said in a joint statement.
However, analysts at Jefferies argued that the latest results from Casino show that it is still under pressure from its debt pile, while its market share in France has been "clearly worsening" in recent months.
They noted that the Teract deal, coming shortly after the news around the Assai stake sale, brings up "further questions" about Casino's ability to lower its debt in 2023.