Casino continues discount drive

Related tags Exchange rates Retailing Casino

A tighter focus on discount outlets continues to pay dividends for
French retail group Casino, whose 2003 figures also benefited from
an upturn in its international operations, writes Chris
Jones.

Although sales for the year were only slightly higher than in 2002 at €22.98 billion - impacted primarily by exchange rates - operating profits rose by 8.3 per cent to €1.6 billion as the group benefited from its drive into the discount sector.

The French food retail sector has seen relatively low growth levels over the last year with consumer spending dropping as a result of the stagnating economy. But while hypermarkets have had a particularly tough time, discount stores have proliferated, and most of the leading retail groups have dedicated an increasing share of their investments to this format over the last year.

Casino is no exception. It operates under the Franprix and Leader Price brands in the discount market, and saw a sharp rise in sales from this format in 2003. On a like-for-like basis, turnover from Leader Price was up 7.4 per cent, but increased by 10.1 per cent overall as a result of the rapid expansion of the store portfolio during the year.

Increasing the share of sales generated through the discount sector inevitably means that turnover growth will suffer, but the lower cost base of this kind of outlet meant that operating profits improved significantly. Operating profit from the two discount fascias was up 19.1 per cent over the year, and now exceeds that of the company's hypermarket division, Géant, accounting for 31 per cent of the total.

A recent report​ from the GfK market research group suggests that the boom in French discount store growth is unlikely to last, with consumers there becoming less price-sensitive, but Casino clearly believes that this is a format with a future.

It is planning to add 175,000 square metres of floor space to its French portfolio this year, increasing to 205,000 square metres in 2005, and nearly three-quarters of this will be for the Franprix/Leader Price stores and the Petit Casino convenience store format.

Outside France, Casino's international business has been hampered over the last few years by a poor performance from its Polish business, but 2003 saw a major improvement in the Géant Polska arm as restructuring efforts began to take effect.

Exchange rates continued to impact results, however, with the weakness of the US dollar against the euro having a major effect. Casino's operations in Asia (Thailand, Taiwan) and Latin America (Argentina, Uruguay, Venezuela) benefited from improving economic conditions in those markets.

Sales from the international businesses grew by 7.2 per cent at constant exchange rates, while operating profits rose by 5.7 per cent to €57.5 million, led by Smart & Final in the US (where a number of non-core businesses were sold during the year) and Big C in Thailand.

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