Casino Guichard-Perrachon SA shares dropped to the lowest in more than two decades after the embattled French supermarket operator signaled 2015 earnings were lower than some analysts estimate.
The stock fell as much as 6.3 per cent to €38.15 in Paris, the lowest price since at least October 1989. Casino Chief Financial Officer Antoine Giscard d’Estaing said it would be “realistic” to estimate 2015 underlying earnings before interest and tax of about €1.5 billion, speaking on a conference call. Analysts have been forecasting €1.65 billion, according to the average of estimates compiled by Bloomberg.
This is a “slight downgrade to previous guidance,” wrote John Kershaw and James Wyatt, analysts at Exane BNP Paribas.
Shortseller Carson Block contends that Casino is using financial engineering to mask a sharply deteriorating core business, and his firm, Muddy Waters LLC, Wednesday extended the attack by saying Standard & Poor’s understated the retailer’s “dangerously” high debt burden. Casino has rejected the claims, saying it has a solid financial structure and that it may take legal action. The market reaction illustrates concern about Casino’s debt and the complexity of its businesses, according to Antoine Parison, an analyst at Bryan Garnier & Co.
“These reports only reflect investors’ latent exasperation,” Parison wrote in a note. Casino’s management needs to convince shareholders it’s committed to debt reduction and the French business is back on track to break the “vicious circle,” he said.
The stock traded 4.9 per cent lower at €38.73 as of 2 pm in Paris. It has slumped 49 per cent in the last 12 months, lopping more than €4 billion off the company’s market value.
Casino’s plan to dispose of more than €2 billion worth of assets this year is on track, Giscard d’Estaing said. The company plans to sell a business in Vietnam in the first half, and Casino’s Big C unit in Thailand is preparing a real estate investment trust, which should be created this year, he said.
The CFO also said it’d be reasonable to estimate 2015 earnings for the French business of €340 million, which Barclays analysts said is 15 per cent less than previous guidance.
Casino’s Cnova NV e-commerce unit started an investigation in December into employee misconduct related to inventory mismanagement at distribution centers in Brazil. The probe has identified a potential overstatement of 2015 sales of about €30 million, Cnova said January 12. Casino said Thursday Cnova hasn’t yet decided whether it needs to adjust previously published financial statements.
Casino’s sales reached €46.1 billion ($50.1 billion) last year, rising 0.3 per cent on an organic basis, the Saint- Etienne-based retailer said Thursday. That was within 1 per cent of the average of estimates compiled by Bloomberg.
Casino’s share decline is unjustified, according to Fabienne Caron, an analyst at Kepler Cheuvreux.
“Despite high leverage, recent measures taken by the company are likely to enable it to navigate 2016 without liquidity risks,” the analyst said in a note. “The company has enough good assets to crystallize if needed.”
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