CONSUMER STAPLES
- Does not consider the independent retailers under the cooperative (SLM) as part of credit assessment given "absence of cross-default, cross-acceleration, guarantees or cash pooling between SLM and the independent retailers" and fact "SLM does not provide ongoing financial support to underperforming independent retailers."
- Notes as an aside "average leverage of the independent retailers is lower than that of SLM."
- It has co's net 2.5x leverage ceiling translating to S&P adj. net 3.5x - co is currently at that (i.e. no headroom to rating threshold).
- When it came to issue we tagged net at 3.4x vs. reported 2.6x so in-line with above.
- Neg. outlook is to account for integration risk on the 294 acquired casino stores (UoP when it visited us was to fund the €1.9b acquisition). Reminder plan is to offload the stores to its independent retailers (it said at the time it may take longer than normal 6-months given number of stores - but had 89% pre-allocated already to members).
- S&P notes some risk around value received on above and if it will cover the €1.1b debt taken out
- It is also flagging potential for disagreement within the group given earnings from Casino acquisitions will only benefit a few members while the costs are integrated and shared by all.
- It notes hypermarkets only 13% of sales with the rest in Supermarkets - the difference in exposure allowing to grow market share over the last 6 years (vs. Auchan & Casino struggles). Also notes vertical integration with inhouse food production (something Auchan wants to leverage as well).
Financial reports; https://www.mousquetaires.com/investisseurs/rapports-financiers/
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