France’s Casino swings to first-half loss as debt deal awaited

By Dominique Vidalon and Helen Reid

PARIS (Reuters) -Cash-strapped retailer Casino (EPA:) suffered a first-half loss after falling sales and price cuts at its biggest stores dented its core French business, while investors awaited a debt rescue deal due to be clinched on Thursday.

Casino is in talks with Czech billionaire Daniel Kretinsky over a plan to inject 1.2 billion euros ($1.33 billion) of new money into the French retailer, and it is still discussing a plan with creditors to restructure its debt pile to avoid bankruptcy.

Finance Chief David Lubek told journalists the goal remained to have an agreement with creditors by the end of the day. On a call with analysts Lubek said he would make no comment on talks with creditors, and he took no questions after presenting the results.

At 0700 GMT the company’s shares were suspended from trading pending a statement.

Kretinsky’s rescue plan would bring an end to the 30-year reign of Casino CEO and controlling shareholder Jean-Charles Naouri at a time when France’s traditional retail sector is adapting to the rise of e-commerce and hard-discount supermarket chains.

Casino’s operating loss of 233 million euros came after a 166 million euro profit in the first half of 2022. Its operations in France posted a 299 million euro loss.

Group net debt at the end of June was 6.1 billion euros, and free cash flow in France deteriorated further to negative 1.6 billion euros, from negative 312 million euros at the end of June 2022.

“The magnitude of the cash burn doesn’t come as a surprise but it shows how fast the debt restructuring/cash injection will have to be,” said Bryan Garnier analyst Clement Genelot.

Genelot argues Casino needs between 2.5 billion and 3 billion euros of new money to recover, much more than Kretinsky is offering.

Consolidated group net sales fell 1.2% like-for-like in the second quarter to 5.5 billion euros, with retail sales in France down 4.2%.

Sales in convenience stores and the upmarket Paris-focused Monoprix banner grew, but hypermarket and supermarket sales fell 15.3% after Casino said it cut prices by an average of 10% in the larger stores, compared to the first half of last year.

“We don’t intend to go further,” Lubek said when asked about possible further price cuts.

French retailers are in pricing discussions with consumer goods brands after the government last month ordered food manufacturers to lower their prices.

“Our aim is, on products where there are reasons to say we are in disinflation, or even deflation, to secure (price) corrections in this direction just as we accepted them on the up,” Lubek said.

France’s sixth-largest retailer is facing the consequences of years of debt-fuelled deals that, following recent losses in market share and revenue declines, have put it on the verge of bankruptcy.

($1 = 0.9007 euros)