January 17, 2020 / 10:00 AM / in a month

Casino shares sink after profit warning, pain spreads to Carrefour, Darty

PARIS (Reuters) - Shares in Casino (CASP.PA) sank 10% on Friday after the debt-laden retailer slashed its forecast for 2019 French operating profit, citing the impact on its fourth-quarter sales of transport strikes in France against pension reforms.

Trading profit from France, excluding real estate activities, was expected to grow 5% in 2019 instead of the 10% the retailer had previously forecast, it said on Thursday.

By 0904 GMT, Casino shares were down 10.7%, leading the fallers on the Paris bourse. The company is due to release full results for last year in February or March.

France’s Fnac Darty (FNAC.PA) was also down 11% after it estimated that fourth-quarter revenues fell 70 million euros due to the social protests.

On Paris’ CAC 40 blue chip index, Carrefour (CARR.PA), which reports its fourth-quarter sales on Jan. 23, was down 0.2%.

“Weak numbers on a soft base, with misses in every segment,” Bernstein said in a note on Casino’s sales, also underlining a “material profit warning in France”.

“Whilst the company did not comment on any other guidance... we struggled to see them hitting (free cash flow) guidance even before the profit warning today,” the firm added.

Bryan Garnier cut its fair value on the stock to 37 euros from 38 euros, also citing “uncertainties surrounding free cash flow in France in 2019”.

Adding to Casino’s woes was news late on Thursday that some classes of bond holders of parent Rallye (GENC.PA) had rejected a restructuring proposal under the draft rescue plan.

“We would expect that to be an additional negative for the (Casino) shares,” Bernstein said. “Surprisingly, those votes aren’t binding for the courts.”

Rallye, whose shares were down 4.7% on Friday, declined comment. There will be a new bondholders meeting on Jan 27.

The company has said its goal is to have a draft debt rescue plan approved by the Paris Commercial court by the end of the first quarter.

Reporting by Dominique Vidalon; Editing by Jan Harvey

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