Emerging markets drive profits growth at Casino

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French grocery group Casino reported strong results for 2011 last week, boosted by overseas operations.

Casino is having a tough time at home but Brazil and Colombia are doing well

Double-digit sales growth was driven by a good performance from its emerging markets such as Brazil and Colombia, which compensated for a weak showing in its domestic market.

Casino reported a 19% rise in operating profit to E1.55bn (£1.3bn) for the year ended December 31, 2011. Underlying net profit rose to E565m (£470m) from E529m (£441m) in the previous year, while overall revenue grew by 18.2% to E29bn (£24bn). Profits at its international operations soared 50.5%, exceeding the contribution from France where full-year earnings dropped 2.6%.

In France, Casino faces strong competition in a country suffering from unfavourable economic conditions. A major challenge will be to improve the sales performance of its Géant hypermarkets where, according to chairman and chief executive Jean-Charles Naouri, non-food sales “fell short of expectations”.

However, to compensate for the declining non-food sales, the opportunity is ripe for Casino to consolidate its position in ecommerce by acquiring niche non-food pure-play operators, such as MonShowroom in France, which it recently bought. The growth potential is exemplified by a rise in sales of more than 14% at Casino’s ecommerce site Cdiscount in 2011.

The retailer announced that its strategic priority is to invest more in high-growth countries where it believes profitability is more promising than in its domestic market. In South America,

Casino will continue to pursue expansion and consolidation of its assets, particularly in Colombia and Brazil where it enjoys comfortable market leadership.

In Colombia, Exito – which is 54.8% owned by Casino – will continue to expand this year, opening more than 100 stores and four Viva shopping centres. Exito is set to become Casino’s platform for growth in Latin America, following the acquisition of its parent’s majority stakes in Uruguayan retail chains Disco, Géant and Devoto for a total of $746m (£470m) last year.

In Brazil, Casino will exercise an option in June to gain full control of Companhia Brasileira de Distribuição SA (CBD), which would end the Diniz family’s (the other main CBD shareholder) ambitions to regain control of the company. Brazil accounts for approximately one-third of Casino’s total sales and, as its second-largest market, is fundamental to Casino’s future.