17 January 2020 by jbchevrel
Casino (COFP) was back under the limelights, it was the notable underperformer today in eur hy cds space. The 5y contract is wider by +40bp on the day, closing at about 700bp. As we can see above, it remains quite low in the range. As it came from 1,100bp last summer and it failed to break below 600bp in the downward trend since then. Today’s move was largely due to a profit warning from COFP which cast doubt on whether its parent company Rallye SA (RALFP) can bring itself back to financial health. COFP said late yesterday that FY19 earnings from its core French retail business missed its forecasts after they took a hit from a wave of strikes and protests across France. As a result, COFP expects operating profit for its French retail business to have grown 5% last year, down from company’s previous 10% target, CFO said. Fnac Darty also had a profit warning attributed to disruption caused by social protests. Casino was especially hit in Paris, through their Monoprix and Franprix chains. These strikes are about the pension reform and those have been prolonging the climate of violence and disorder experienced since the Yellow Vests movement started, in autumn 2018, helping crime statistics sky rocket throughout France, but especially in Paris. French retailers are probably one of the best segments of the market to express that, as the sovereign isn’t bothered (10y OAT just 25bp over Bund) because the ECB is here and there is no election that really matters before the spring of 2022.