March 7, 2017 / 8:36 AM / 3 years ago

Retailer Casino's shares slide as 2017 profit outlook disappoints

PARIS (Reuters) - Shares in French retailer Casino (CASP.PA) fell on Tuesday after analysts said the company’s profit growth forecast for 2017 was not as robust as they had hoped.

A customer stands in an aisle near a shopping trolley in a Casino supermarket in Nice, France, January 16, 2017. REUTERS/Eric Gaillard

Casino, whose credit rating was cut to junk by Standard & Poor’s in March 2016 and which has been criticised by U.S. activist fund Muddy Waters, is under pressure to show it can revive profits in France at a time of slower growth in Brazil.

Casino expressed confidence in boosting sales and earnings this year, after delivering a promised rise in profits and cash flow in its core French market, and cutting back on its debts.

For 2017, Casino predicted growth of at least 10 percent in group operating profit at current exchange rates, having achieved a 3.7 percent rise in 2016 despite a weak performance in Brazil, its second-largest market after France.

However, its shares fell around 5 percent -- the worst-performing stock on Paris' SBF-120 .SBF120 equity index -- as investors and analysts said the profit outlook was not as good as expected.

“The outlook for growth was below the market consensus,” said Keren Finance fund manager Gregory Moore.

Casino shares remain up by around 9 percent so far in 2017.

Group operating income rose to 1.034 billion euros ($1.1 billion) against a restated figure of 997 million euros for 2015, broadly in line with analysts expectations of 1.046 billion euros in a Thomson Reuters I/B/E/S poll.

Its 2015 data have been restated to take into account the sale of Asian assets while Brazil appliance retailer Via Varejo VVAR11.SA, which Casino has put up for sale, is deconsolidated from the 2016 accounts.

Its French operations’ profits rose to 508 million euros in 2016 against 337 million in 2015, in line with the company’s guidance for profits of slightly over 500 million euros.

For 2017, Casino said it aimed to grow operating profit of its food retail operations in France by 15 percent and forecast a contribution from its property development operations of 60 million euros against 87 million euros in 2016.

In recession-hit Brazil, where Casino controls retailer Grupo Pao de Aucar (PCAR4.SA), operating profit fell to 314 million euros from 434 million as promotional spending to boost sales at the Extra hypermarkets weighed on profits.

Casino’s shares were hit hard in December 2015 when activist investor Muddy Waters said the group was “dangerously leveraged” and managed for the short-term.

The company has rejected the criticism and cut debt by selling assets in Asia while posting better results in France and simplifying the group’s complex structure, and Casino predicted a further improvement in its gearing ratio in 2017.

($1 = 0.9449 euros)

Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta/Keith Weir

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