PARIS Retailer Casino (CASP.PA) said sales fell in the fourth quarter in its core French market - including a near 10 percent drop at its hypermarkets - after it funded permanent price cuts on basic products by reducing promotions, attracting fewer shoppers.
Casino, which controls Brazil's top retailer Grupo Pao de Acucar (PCAR4.SA), said it offset the French weakness thanks to robust growth in emerging markets in Latin America and Asia, which now make up 63 percent of group sales.
Finance chief Antoine Giscard d'Estaing said the operating margin of the French business should decline "moderately" but he was "confident" that 2012 operating income would be above 1.94 bln euros, a year-on-year rise of some 25 percent.
Signs of worsening business in France could raise concerns about quarterly sales at larger domestic rival Carrefour (CARR.PA), due to be unveiled on Thursday.
Casino, which competes with Carrefour (CARR.PA) and unlisted Leclerc, Intermarche and Auchan, said group fourth-quarter sales reached 12.856 billion euros ($17.16 billion), in line with the 12.8 billion-euro forecast in a Thomson Reuters I/B/E/S poll of analysts.
Like-for-like sales rose 3.2 percent, which was a slowdown from 4.2 percent growth in the third quarter.
MORE PRICE CUTS IN 2013
In France alone, sales excluding acquisitions and petrol fell 2.2 percent after a 0.2 percent rise in the third quarter.
"The economic environment was again quite soft with no real pickup in holiday sales except for online sales," Giscard d'Estaing said.
Same-store sales excluding petrol at Casino's Geant hypermarkets plunged 9.9 percent in the quarter, accelerating a 5.4 percent fall in the third quarter.
Analysts had expected a 7 percent to 10 percent fall in French hypermarket sales after Casino cemented lasting price cuts on its private labels and basic products in a bid to stem market share loss.
To fund that decision Casino chose to cut down on promotions, which meant fewer shoppers were lured into its stores.
Analysts say that it usually takes several months before price cuts lead to stronger sales volumes and Giscard d'Estaing said this should happen this year.
"When people get a better vision of your price positioning, you get traffic and volume uplift," he said.
In the meantime, Casino is extending price cuts to national brands at its Geant hypermarkets.
"We are taking steps in 2013 to be more price competitive...We are more expensive than the market on national brands and the strategy is to reduce that price gap," he said.
Casino's dismal performance in France mirrors a fiercely competitive Christmas season in Britain, which was marked by heavy discounts as shoppers fret over job security and a squeeze in income.
Elsewhere in France, the online nonfood business CDiscount posted 16.1 percent growth, underscoring a shift among shoppers toward the Internet.
International sales remained robust though growth slowed slightly at Exito in Colombia and also in Brazil, where same-store sales excluding petrol grew 6.6 percent after rising 8.1 percent in the third quarter.
(Reporting by Dominique Vidalon; Editing by Sophie Walker and M.D. Golan)