Shares in French retailer Casino slump after Moody's downgrade

Shares in French retailer Casino slumped by around 15% on Friday after rating agency Moody's downgraded several of the group's credit ratings, citing market share losses, weak liquidity and high debt. The stock hit a record low of 5.6050 euros ($6.02) before regaining some ground. Its shares were set for the worst day of losses since the company's listing in 1985. Shares in Casino's parent company, Rallye, also shed 15%.

Moody's said the downgrade reflected continued market share losses in the French retail market, with a reduction in retail margins for last year, and negative free cash flows in its home country. "The company continues to burn cash with negative free cash flow in France of around 900 million euros in 2022," it said.

It also will have to rely on the proceeds from its ongoing asset disposal plan to repay upcoming debt maturities. "Casino still has to refinance or repay around 1.2 billion euros worth of outstanding notes by 2024 and a further 1.8 billion euros worth of outstanding debt in 2025. Moody's expects Casino will repay 2024 maturities through asset disposals," the agency added.

Casino did not immediately reply to a request for comment. The company is in exclusive talks to combine its French retail business with smaller food retailer Teract as it seeks to reassure investors over its ability to generate cash and reduce debt. Earlier this month it also sold down its stake in Brazilian supermarket chain Assai.

But Moody's said the asset sale program to cut debt meant Casino was reducing its geographical diversification and thus increasing its exposure to the French market. "Moody's expects Casino to struggle to maintain its sales volumes in 2023 as inflation remains high, consumer confidence remains low and competition in the French market is fierce."