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All Eyes On Retail

22 May 2019 by jbchevrel

Casino (COFP) went under pressure today, with its 5y CDS wider by c80bp, while XOver s31 fair value was up by ‘only’ 4bp. The CDS closed at its widest level ever, 710bp mid context. The curve flattened some c35bp between the 1y point and the 5y point. Firstly, the French news paper Le Figaro reported that the offices of COFP have been raided by the EC and the French police, along with Intermarche owner Les Mousquetaires. This is due to a joint buying alliance INCAA with Intermarche which was dissolved last summer. The EC then said that its officials carried out unannounced inspections in the offices of French retailers on Monday, saying it has concerns that 2 retailers “may have violated EU antitrust rules that prohibit cartels and restrictive business practices”. CO FP stocks went under pressure also, down -6.5% in mid London PM before bouncing back in late session. Closed -3.5%. Worth remembering that these stocks are collateral to loans contracted by the mother company Rallye (RALFP), whose CDS is wider also, closing north 45% today. The fact that a sell-side analyst downgraded the name overnight didn’t help, as it was the case by the past. Also noteworthy that COFP has similar alliances with both AUCHAN (CDS just wider +2, in line with iTraxx Main - called ‘Horizon’), one with MEOGR also. Across the channel, Marks and Spencer PLC (MARSPE) was also under pressure, but to a lesser extent, 5y CDS +13bp. The Baa3/BBB- name saw net debt reduced (£1.5b and thus leverage is down to 3.0x from 3.1x) and FCF still robust (£584m), but as far as growth is concerned, LFL sales went down -1.6%. Going forward, the rights issue and dividend move to finance the Ocado joint venture show that creditors could hope to see more growth, in a credit-friendly manner. The retail sector was also topical in the US today. Indeed, Nordstrom (JWN) was the worst performing CDS in CDX IG. CDS is wider +21bp and the 3s5s is steeper about +15bp, as they cut their guidance. This was due to changes to loyalty program and merchandising misses which took sales down for the 2nd quarter in a row.