Retailer Casino in talks to team up with Teract, posts lower annual profit

By Dominique Vidalon

PARIS (Reuters) -Supermarket chain Casino said it was in exclusive talks to combine its French retail business with smaller food retailer Teract as it seeks to reassure investors over its ability to generate cash and reduce debt.

Casino, controlled by 73 year-old Jean-Charles Naouri, also said on Friday it plans to further cut costs this year after reporting a 5.9% decline in 2022 group operating profit, hurt by a slump at its core French operations and weak fourth-quarter sales.

The company, which has been selling assets to cut debt, reiterated that it aimed to complete the final 400-million-euro ($423.64-million) leg of its 4.5-billion-euro disposal plan in France by the end of 2023.

Casino, which also controls Brazil's Grupo Pao de Acucar, said it will continue selling assets in Latin America this year.

Earlier this week Casino said it had initiated a study on a potential new sale of part of its stake in Brazil supermarket chain Assai for about $600 million.

Few details of the deal with Teract have so far emerged, but about 500 million euros in equity will be injected in the new venture to allow it to "execute an ambitious growth plan" and discussions have already started with potential investors, Casino and Teract said in a joint statement.

This however did little to reassure investors. By 0907 GMT, Casino shares were down 5.5% at 8.12 euros.

"That this comes so soon after Casino announcing this week that it is considering placing a further $600 million of its Assai stake ... will raise further questions about the progress on leverage in 2022 and into 2023," Jefferies analysts said.

"Casino's leverage remains in a challenging position and domestic market share has been on a clearly worsening trend in recent months, they added.

At end-2022, consolidated net debt stood at 6 billion euros versus 5.9 billion euros a year earlier, due to an increase in Assai-related debt linked to its expansion plan.

Casino said its 2022 operating profit fell 5.9% to 1.12 billion euros. At constant-exchange rates the decline was 12.1%.

Annual core profit at the company's French retail business decreased 9.1%, with sales at Geant hypermarkets dropping sharply in the fourth quarter on higher competition.

Casino's 2023 priorities in France include reducing inventory by 190 million euros in the first half, a new cost-reduction plan of 250 million euros at retail banners and an acceleration of the expansion strategy for convenience stores.

($1 = 0.9442 euros)

(Reporting by Dominique Vidalon; Editing by Benoit Van Overstraeten, Sherry Jacob-Phillips and Shounak Dasgupta)