Casino Shares, Bonds Point to Woe for Naouri Grocery Empire

Jean-Charles Naouri has defied skeptics for years by keeping control of his debt-fueled French grocery empire even as sales slumped and competition mounted. Investors are growing more convinced than ever that time is running out for the supermarket titan.

(Bloomberg) — Jean-Charles Naouri has defied skeptics for years by keeping control of his debt-fueled French grocery empire even as sales slumped and competition mounted. Investors are growing more convinced than ever that time is running out for the supermarket titan.

Shares of the company Naouri runs, Casino Guichard-Perrachon SA, plunged to a fresh record low Friday after Moody’s cut its long-term debt rating further into junk territory. Casino’s bonds also tumbled, and stock in the main investment vehicle through which Naouri controls the business, Rallye SA, lost a third of its value this week.

The problem, in a nutshell: Casino has borrowed too much money and its stores aren’t generating enough cash, so the company relies on selling assets to pay down debt, with credit-default swaps indicating a 91% chance of default within one year. It also isn’t able to pay a dividend to its shareholders, of which Rallye is the biggest. And without cash from Casino, Rallye won’t be able to make debt payments under a court-supervised restructuring plan that was approved in 2020. 

Declines in Casino’s stock and bond prices accelerated this week when it reported a bank overdraft in its 2022 results that implies weaker liquidity in its French business than previously reported. The parent company’s shares also dropped when it said in its own results that Casino’s struggles will make it increasingly difficult to meet the terms of the restructuring. Rallye said it will talk to its creditors about ways to adjust the plan. 

Possible outcomes include either overhauling the restructuring plan or Rallye filing for a French insolvency procedure known as redressement judiciaire, with Naouri potentially losing control of the business. But until February 2025, when the company needs to make payments related to its safeguard, Rallye’s creditors’ hands are tied beyond engaging with the company.

“The company has two main problems,” Nishant Choudhary, an analyst at AlphaValue, said of Casino. “One is very high debt, and that is not something new, but it is still a big pain point. But the most recent pain point is the declined or negative free cash flows in France.”

Representatives of Casino and Rallye declined to comment on the drops in the share and bond prices.

Naouri, Casino’s 74-year-old chairman and chief executive officer, has built a network of stores that are a prominent feature of French cities and towns, especially in the Paris region and on the Côte d’Azur, in the country’s prosperous southeast. The higher-end Monoprix chain is similar to Marks & Spencer Plc, offering housewares and clothing in addition to groceries, while the smaller Franprix outlets are ubiquitous in Paris neighborhoods.  

But the French grocery market has been tough for years, with fierce price competition from Carrefour SA, unlisted companies including Leclerc and Auchan and German discounters Lidl and Aldi. 

Casino has been selling assets to use the proceeds to pay down debt — last week it sold a $780 million stake in its Assai subsidiary, a chain of cash-and-carry stores based in Brazil.  

Casino’s French business had €4.5 billion of net debt as of Dec. 31, while Rallye’s debt amounted to €2.8 billion. 

Under the terms of its borrowing, Casino can’t pay dividends unless its gross financial debt is less than 3.5 times the earnings of its French business. That ratio was 6.8 at the end of 2022, according to Rallye, meaning the company is far from being able to provide the cash Rallye needs to meet its debt maturities.

Bonds issued by Casino’s subsidiary Quatrim rose 2 cents to 91 cents on the euro Friday after the company said it would offer to buy back €100 million of the debt at 94 cents. Still, that’s not much given the amount of cash Casino generated from the Assai sale, said Clement Genelot, an analyst at Bryan Garnier & Co.

“The amount of the buyback is relatively small and suggests the company is using most of the proceeds for short-term cash needs at Casino France,” he said.

Casino’s other, more junior bonds are in deep distressed territory. Its notes due in March 2024 are quoted at around 55 cents on the euro, down from 83 at the start of this month. Securities due in January 2026 are quoted at 34 cents on the euro, versus 58 at the start of the month. Rallye’s bonds have traded at pennies on the euro since it entered into the debt restructuring, a so-called safeguard proceeding, in 2019.

The start of that process four years ago led some analysts to predict Naouri would be ousted from his roles. There’s also been periodic speculation that he would engineer a merger with rival Carrefour, and he’s tangled over the years with short sellers who bet on further declines in the stock price. 

One battle, with Carson Block of Muddy Waters Research, ended with both sides getting a warning from France’s market regulator about how they were communicating with financial markets.

Yet Naouri has managed to hang on, helped in part by French restructuring laws that are favorable to management and existing shareholders. Now he’s in talks to merge his French retail operations with those of Teract SA, a challenger backed by billionaire Xavier Niel.

“As of today, Casino has assets worth less than the amount of unsecured debt but Naouri has good relationships with banks and I wouldn’t be surprised if he can negotiate more financing,” said Francois Guyot, an analyst at independent credit research firm Spread Research. “On top of that, you will also have proceeds from the Teract partnership.”

Investors, though, are growing more skeptical. Casino’s stock dropped 15% to €5.68 at 4:12 p.m. in Paris on Friday, down from a peak of more than €100 in 1999. Rallye lost 15% to €1.60.

Casino’s equity is valued at less than €620 million, or 0.02 of sales, the lowest among European retailers.     


–With assistance from Albertina Torsoli, Michael Msika and Luca Casiraghi.

(updates bond pricing throughout, adds analyst quote in third to last paragraph.)

More stories like this are available on

©2023 Bloomberg L.P.