EUR 850.00 For Business Accounts Only

Morningstar | Casino Group Reports In-Line 4Q Sales; Social Unrest Weighs on Sales Growth in France

Casino Group reported fourth-quarter and fiscal 2018 sales, with full-year group sales up 3.0% on a same-store basis and 4.7% organic growth (3.6% and 5.1%, respectively, for the quarter), in line with our expectations. Given this mostly in-line print, we maintain our no-moat rating and EUR 32 fair value estimate. On the call, management reiterated full-year guidance despite a negative impact from the yellow vest movement during the quarter (10% group EBIT growth at constant currency and excluding tax credits, French EBIT growth of 10%, among others).

French sales were up 1.3% (0.5% for the quarter) on a same-store basis, with Monoprix, Casino Supermarkets, and convenience growing 0.5%, 0.8%, and 2.5% like for like, respectively, with Geant hypermarkets' sales being flat. We think Monoprix's sustained underwhelming performance may signal margin concerns going forward, given the banner's high profitability relative to the rest of the group. Management said that lower growth in this quarter was mainly the result of the yellow vest movement, which had an estimated impact of around 1% on France retail same-store sales growth. In Brazil, GPA Food's (more than 70% of Latin American sales) same-store sales were up 6.9%, with Assai (48% of GPA Food sales) growing 9.7% like for like and 23.3% on an organic basis.

We think Casino Group still faces serious structural issues: Monoprix's latest quarterly growth numbers attest to an intensified competitive landscape in the Paris area, while larger peers are boosting investment in online capabilities, where Casino's presence is still anemic. On top of that, we believe the group's complex ownership structure and parent Rallye's reliance on Casino's dividends (8% dividend yield) will continue to erode value for long-term shareholders.

The company will announce full fiscal 2018 results March 14.