A leading retail analyst has said that Groupe Casino's decision to steadily increase pricing at its French supermarket division is likely to impact the group in the short term, in terms of price perceptions, but it could help the retailer achieve its planned EBIT margin targets.
Bruno Monteyne of Bernstein Research was commenting following the publication of Casino's first-quarter results last week, in which the group reported that total gross sales under banner in its French operations rose by 0.8% in the period.
The group's Casino Supermarkets division remained stable on a same-store sales basis (+0.0%), the group reported, with the banner continuing its 'upmarket move' – sales of organic products, for example, are up 11.0%.
In the same period last year, Casino Supermarkets posted a 0.8% increase in sales.
Overall, same-store growth in the group's French operations was flat in the first quarter of 2019 (+0.0%), with total sales down by 3.3%.
'Disappointing' Performance
Commenting on the group's performance in a briefing note, Monteyne described Casino's numbers as 'disappointing', writing that the retailer posted its 'worst performance in France since Q3 2016, despite the higher inflation in Q1 and the positive impact of selling and closing the worst performing stores.'
On the supermarkets division, where pricing has been 'drifting upwards over the last year' – compared to Carrefour, where pricing is declining – Monteyne added that 'this steady increase in pricing could be a strategy to help Casino hit their EBIT margin target of 10%+ in FY19.
'However, we feel this is a short-term gain for pain in the long run – the company will be less price competitive and this will eventually lead to a reduction in customer traction and hence sales.'
Casino is enjoying a 'better mix impact' through sales of organic products, which 'might be the right direction' for the group to take, Monteyne noted, 'but the combination of low same store sale and space decline (from closing and selling stores) creates for steady sales decline, which does not seem sustainable to us.'
'Whilst it is important for a retailer to focus on margin, we would hope that it is not at the detriment of customer traction,' he wrote.
Amazon Tie-Up
Elsewhere, Casino is confident that its Monoprix division will reap the benefits from the group's tie-up with Amazon Prime Now, which now covers all of Paris, as well as more than 35 border towns.
Monoprix also posted flat same-store growth in the quarter (0.0%), however, e-commerce sales at the division rose by 11.8% for food products.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
