Curve has obviously been left wide, but we struggle to take a firm view given co's lack of reporting clarity. Given the property holdings, cash on hand and otherwise low leverage (against historical grocery arm earnings), we are (less) concerned for the €25s (280 over swap, 6.3%). But even there Walgreen Boots €26s trade at +290 and will bring earnings soon (15th). May be worth waiting to see if it can put a stop to its bleeding first.
We have written extensively on Auchan after earnings and attempted to plug the holes where we can - S&P comments were very helpful in that. Please refer to past notes but as a repeated cautionary note please be weary of heading in for carry (despite next earnings likely in late Feb). In early April we endorsed the new April 28s in primary given it was coming 57bp (!) wide to secondary (even pricing 13bps wider to 8-month LONGER March 29s). Still it drifted +50bps wider into earnings day (on no news). In early August while encouraging caution (as we are today) we included a table of the spread moves one could sustain while offsetting it with carry to FY earnings - the moves since (again on no news) have eaten through most of the ~7months of carry (see below table updated).
Carrefour earnings (23rd of Oct) is the next scheduled catalyst for Auchan and ITM 29s.
