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RED HERRING

French retailers blame pension strikes for declining holiday sales

Annabelle Timsit
By Annabelle Timsit

Geopolitics reporter

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Shares in two of France’s biggest retailers dipped today (Jan. 17) after the companies said sales were hurt by five weeks of union-led protests over pension reform during the holiday season.

At the close of trading on the Paris stock exchange, Euronext, shares of supermarket chain Casino Guichard were worth €36.98 ($41.02), down about 4.6% from the previous day’s close price of €38.76. Shares of consumer electrics group Fnac Darty closed at €46.98, down 7.2% from €50.65 the previous day.

The retailers—as well as Casino’s parent company, Rallye—were among the stocks that saw the biggest declines on Euronext at the time of publication.

On Thursday, Casino Guichard issued a warning to investors, saying it expected trading profit to grow by only 5% in 2019 (pdf, p. 2), half of its previous forecast of 10%. Meanwhile, Fnac Darty said the strikes cost them an estimated €70 million in fourth-quarter sales, with large losses recorded in its city-center stores around Christmas.

Shares of rival supermarket giant Carrefour, which reports earnings on Jan. 23, briefly dipped in early trading, but rebounded by 10:30 am CET.

Massive strikes led by trade unions over a government proposal to overhaul France’s convoluted pension system have disrupted or shut down airports, public transportation systems, and ports in major cities since December, leading to a loss of more than €1 billion for the state-run railway companies. Under French president Emmanuel Macron’s proposal, the 42 separate schemes that currently regulate some public-sector employees’ retirement funds would be centralized into a single, points-based system.

The retailers said that public transportation strikes made it difficult for consumers to get around major cities like Paris or Marseille, leading to a dip in sales of consumer goods.

Analysts didn’t seem confident in the companies’s assertions that the strikes were to blame for their unexpected losses. In a note, Bernstein warned that “other factors are likely to contribute to this profit warning.” Casino has been facing stiff competition from online retailers and is selling assets to reduce its debt. Analysts say investor sentiment around Casino may also be affected by uncertainty surrounding a tumultuous debt rescue plan for its parent company.

In a conference call with investors (pdf), Casino’s chief financial officer David Lubek said that he expected a better financial outlook for next year, citing the completion of a plan to dispose of assets worth €4.5 billion by March 2021, as well as the roll-out of more autonomous stores and technology solutions aimed at increasing customer loyalty. And in a note (pdf), Fnac Darty CEO Enrique Martinez said his group “remains cautious about the performance of its markets in 2020,” but “would target a slight growth in revenues and current operating income.”