(AOF) – Fitch Ratings has raised Casino’s long-term rating from ‘RD’ (Restricted Default) to ‘CCC+’. “The rating upgrade follows the approval of the financial restructuring as part of an accelerated safeguard procedure in accordance with French insolvency law,” explains the rating agency.
The “CCC+” rating reflects the rating agency’s opinion “that the execution risk linked to the recovery of Casino’s commercial performance and the subsequent absorption of cash flows will prevail in a firstly on the reduction of the company’s debt after the restructuring, the improvement of liquidity and the expected proceeds from disposals.
“We believe Casino will still face significant challenges in 2024 and we continue to have limited visibility on the amount of liquidity that will be absorbed by the company’s recovery,” Fitch warns.
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Two major challenges for the sector
The turnover of distribution brands increased by 6.6% in the third quarter of 2022 according to the IRI panelist. Such a performance had not been recorded since the confinements of 2020. However, since the end of September, volumes have declined following the increase in prices. The results of French players, rather spared until now, should therefore suffer. Moreover, in the United States, Walmart and Target have issued warnings about their results.
Another challenge: logistical disorganization. According to NielsenIQ data, the out-of-stock rate increased further on the shelves to reach 5.8% at the end of October. This represents a shortfall of 3.5 billion euros since the start of the year. According to Système U, these disorders have never been observed for more than fifty years. The reasons are multiple: both climatic, geopolitical, logistical, inflationary, and also linked to the behavior of consumers, who stock certain items. On the other hand, the strike in the refineries seems to have had little impact because the brands managed to organize themselves.