GPA/CASINO - comment

GPA is a business in transition as they proceed with the closure and sale of the hypermarket format and resize the entire business. The Exito business continues to perform strongly. We remain of the view that the LATAM assets are the most likely assets for Casino to divest in the medium term to deleverage its balance sheet. Please refer to our analysis on how Casino can reap 100% of the to-be-unlocked value in the region, rather than just its minority share. The transition in the GPA business, which involves opening 200 new stores by 2024 may delay any sales process, but we expect Casino will not be able to wait until this is executed.

Topline sales at GPA Brazil (excluding the hypermarkets) were marginally ahead on the same-store basis, but with the cost base still to be adjusted and the impact of selling down old stock from the hypermarket stores, EBITDA fell. Gross Profit margin declined by 20bps but with the SGA not fully adjusting, EBITDA margin fell to 7.7%, down 110bps.

Grupo Exito, their Colombian subsidiary had strong sales numbers across their three markets, with a 20% increase at constant currency. Gross profit margin declined versus Q1 2021 due to the inclusion in 2021 of some real estate development and trading fees which has not recurred. The GP margin is currently at 25%, leaving an EBITDA margin of 7% for the Exito business.

With the normal outflow of Working Capital in Q1, leverage is currently 2.1x at GPA, an increase versus the same period last year.