International analysis: Casino’s gamble in Latin America pays dividends

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France-based Casino’s strategic decision to invest in a handful of fast-growing markets has once again paid off.

Despite tough times in France, Casino is benefiting from its overseas presence

Casino’s net sales rose by 3.8% to E8.6bn (£6.71bn) during the second quarter, comparing favourably to rival Carrefour’s sales decline of 0.4%.

Once again, Casino’s international operations are to thank for boosting growth – sales were up 13.1% to E4.08bn (£3.18bn), countering the decline in France, where revenue fell 3.3% to E4.53bn (£3.54bn).

Latin America remains the main pillar for the group’s growth. Brazil and Colombia are its second and third largest operations respectively.

In Brazil, Casino secured one-third of its total sales with the takeover of Grupo Pão de Açúcar (GPA), which posted rising sales of 11.4% and robust like-for-like sales up 5.6%. As with Carrefour, Casino benefits from the strong performance of its cash and carry format, Assai, and its non-food specialist Via Varejo.

Management transitions must be conducted smoothly in order for Casino to maintain performance. The grocer decided to only appoint Brazilian executives to its GPA board of directors, and installed Christophe Hidalgo – who has previously worked in Colombia and Argentina – as chief financial officer. However, despite Casino’s dominant position, it is fair to say that Carrefour will aim to close the gap in the only market that is working for it right now.

In a French market afflicted by gloomy economic conditions and increased price competition, Casino has made the strategic choice merely to maintain market share. Unlike Carrefour, Casino has managed to resist becoming embroiled in price wars, which so far have benefited Leclerc and its peers.

A thorn in Casino’s side, however, remains its Géant hypermarkets, hampered by non-food sales – down by 11% this quarter – as a result of reduced discretionary spending and growing online competition.

In response, the retailer will continue to scale down non-food, building on the 8% cut in non-food sales area over the past six months. Nevertheless, this issue remains easier to address for Casino than for Carrefour, as Géant hypermarkets contribute just a quarter of French turnover.

Casino has also enthusiastically embraced ecommerce with its Cdiscount site, which has gone a long way to counteracting the hypermarkets’ declining non-food sales thanks to its turnover soaring 20.1% this quarter.