Slower sales at debt-laden French retailer Casino sink shares

By Dominique Vidalon

PARIS (Reuters) - Heavily-indebted French retailer Casino said on Thursday sales growth slowed in the first quarter, fuelling further concerns over its ability to generate cash and sending its shares down as much as 15%.

Casino, headed and controlled by veteran entrepreneur Jean-Charles Naouri, is striving to find a way out of its financial woes, and considering rival tie-up proposals.

But in a sign of its challenges, Casino posted first-quarter sales of 5.44 billion euros ($6 billion), with growth dragged down by supermarkets and hypermarkets in its core French market.

On a same-store basis and excluding acquisitions, currency effects and revenue on fuel, sales rose by just 1.0% in the quarter compared with 4.4% growth in the fourth quarter of 2022.

In France, like-for-like sales fell 0.4% despite food inflation running at an estimated 15%, according to Barclays analysts, with its Parisian and convenience banners Monoprix and Franprix unable to offset a big decline for hypermarkets and supermarkets.

Price reductions of 5-10% launched in the first quarter to attract shoppers struggling with the high cost of living were expected to start boosting customer traffic, volumes and net sales in coming months, Casino said.

"Our aim is to stop market share loss," Finance Chief David Lubek told analysts.

DISPOSAL PLAN

With around 3 billion euros of debt maturing in 2024 and 2025, Casino has been selling assets to meet debt repayments, but that has increased its exposure to the French market.

Disposals at the end of the first quarter amounted to 4.2 billion euros, near its year-end target of 4.5 billion euros, including the sale of an 18.8% stake in Brazilian supermarket chain Assai for 723 million euros.

But despite those sales, net debt at end-March stood at 4.5 billion euros, stable versus the end of first quarter 2022.

"We estimate that Casino's underlying FCF (free cash-flow) generation remained negative over the past months," Barclays analysts said.

Lubek declined to give an update on the two tie-up proposals received by the group.

Czech billionaire Daniel Kretinsky, Casino's second biggest shareholder, has offered to take control of Casino through a 1.1-billion euro capital increase, challenging a proposed tie-up between Casino and smaller retailer Teract.

"We have elements that objectively show the financial situation is no longer tenable unless prompt action is taken," Kretinsky told French magazine Le Point on Wednesday, saying his proposal was "not hostile".

In March, rating agency Moody's cut its long-term debt rating on Casino further into junk territory, citing market share losses, weak liquidity and high debt. Fitch followed suit this week as it said the terms of Kretinsky's offer were potentially unfavourable for existing creditors.

($1 = 0.9022 euros)

(Editing by Silvia Aloisi and Mark Potter)