Following the announcement that it is targeting a further €2 billion worth of asset sales, a leading retail analyst has suggested that Groupe Casino's hypermarket or discount operations could be earmarked for disposal.
Bruno Montyene of Bernstein Research was commenting after Casino said that is planning to 'accentuate its unique positioning in buoyant formats (e-commerce, premium and convenience) and geographies', as part of its 2019-2021 strategy.
The retailer added that it aims to have completed its latest €2 billion asset disposal plan by the end of Q1 2021, as well as accelerate investment in 'new high-growth businesses', including energy, data, advertising and data centres.
'Less-Buoyant Formats'
According to Monteyne, the retailer's announcement that it will be focusing on 'buoyant formats' makes no mention of its less-buoyant formats, namely its Géant hypermarket operation, its Leader Price discount business, or even its supermarket business.
This would indicate that Casino is 'preparing to dispose of one or more of these, having just recently sold loss-making stores in these banners', he said. 'This would be a continuation of that trend and it would make strategic sense given: Hypers' structural decline, Leader Price's continual restructuring and Supers' much-needed price investments to get back to price competitiveness.'
At the same time, he suggested that Casino is likely to retain its Monoprix and Franprix banners, as 'these are probably the cash generators of the business', while Cdiscount might also 'have future profit potential'.
Potential Suitors
Potential candidates for one or more of Casino's segments would be Lidl and Leclerc, Monteyne suggested, as both retailers have acquired packages of disposed outlets in recent months.
'Whether either have the appetite to acquire an entire fleet of stores remains in question. Realistically, we will probably see multiple buyers for multiple stores,' he added.
Monteyne also added that the fact that Casino is announcing a further €2 billion asset disposal programme, on top of the soon-to-be-completed €2.5 billion programme, suggests that the business is facing cash generation problems.
'In 1H19, whilst the company reported an accounting profit growth of +22% in France, cash flow from continuing operations (the cleanest cash measure, before working capital) was down -17% (more details here). That is a 40% gap from accounting to cash reality,' he said.
There may also be restructuring costs associated with the asset disposals, which 'could take up a very large part of the €2bn disposal proceeds', Montyene added. However, he noted that the business 'would still probably benefit from a more profitable remaining business'.
Announcing the planned asset disposal programme on Tuesday, Casino said that this process would 'complete the transformation' of its business model, meaning that the business will operate, in France, 'a set of activities adapted to the new needs of consumers and benefiting from synergies accentuated by the consistency of their positioning'.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
