Insights on food retail during Covid-1 from Casino Q1 Sales update

All,

Yesterday’s Casino Q1 call gave interesting insights into a grocer’s sales and EBITDA under Covid-19. Extrapolating these effects to Iceland for instance lends further support to our position in that name.

Same store sales growth was 5.8% in France, increasing 24% over the last 4 weeks. This is the first time Casino have released an update on EBITDA/EBITDAR for the quarter (it suited them!) showing a 67m increase over Q1 2019 levels. 

During the conference call Casino implied that 2/3rds of the increased EBITDA is derived from increased sales level, and 1/3rd from the impact of the Rocade plan. 

Therefore:

In relation to Casino, we can imply a c.€90m increase in EBITDA for FY20 for impact of the Rocade plan.  

The increase in EBITDA equates very closely to Gross Profit as defined by Casino, or c.25%, showing the operational leverage of the retailer.  

The update we received from Tesco earlier this month was more focused on the additional costs borne by the retailer in the current environment - Casino appear to be able to withstand that with the increase in sales more than compensating for the increased costs due to extra measures to keep customers and staff safe.  

In relation to Iceland, we have modelled a more modest increase in sales (10% in the month’s of lockdown) with 20% Gross Margin with additional costs subduing the increase in EBITDA.  (See previous email).  

We remain positive on Casino and hope to release a fuller update in the coming days. 

Tomas