Casino, Guichard-Perrachon S.A. (CO) Earnings Call Transcript & Summary

Welcome to the Fourth Quarter 2019 of Casino Group Conference Call. I now hand over to Mr. David Lubek, Chief Financial Officer of the Casino Group. Sir, please go ahead.

Good afternoon, and welcome to our 2019 fourth quarter sales conference call. I'm here with Régine and the IR team, it is still time to wish you a happy new year. I will start with some general comments on our 2019 full year sales performance before providing details on the fourth quarter sales. 2019 was a year of transformation for our business. We focused on our best formats, our best geographies and our best categories. At the same time, we have continued to invest in technological solutions to boost customer traffic through our autonomous stores, increase customer loyalty through our apps and develop new sources of growth in B2B revenues, with energy, data monetization and cloud computing. This will continue in the coming quarters. And with the completion of our EUR 4.5 billion disposal plan in France by March 2021, we are confident that we will be well positioned to compete successfully in the rapidly evolving retail environment. In terms of the full year performance, 2019 sales amounted to EUR 34.6 billion, with like-for-like growth of 2.2% and organic growth of 4.2%. These numbers no longer include Leader Price, which has been classified as a discontinued activity as a result of our decision to sell this business and the advancement of our negotiations. Including ForEx effects, total sales were also positive at plus 0.9%. In France, annual like-for-like sales grew by 0.3%. Our banners demonstrated strong resilience even in the environment of the December strikes. With good growth in customer traffic since Q4, boosted by the accelerated rollout of our autonomous stores, we believe we are well placed to deliver sustainable sales growth in the coming quarters. Cdiscount had another year of strong, profitable growth, with 9% GMV over the year and an increasing share of marketplace each quarter, plus 4.5 points in Q4. Share of marketplace is a key lever of profitability and the successful launch of new services, such as travel, and the tenfold growth of the number of third-party SKUs eligible for express delivery have both helped to drive an increase in our marketplace share. In Lat Am, organic growth remained strong at 9.7%, once again driven by the very rapid development of Assaí, coupled with good performance of the new supermarket formats in Brazil and a successful turnaround of our banners in Colombia. Before going into the details of Q4, a few more words regarding the performance in France for the year. First, the accelerated development of our digital solutions, where we believe we are well ahead of the competition. This has resulted in a significant improvement in customer service, with more than 300 autonomous stores opened in the evenings, on Sundays and in some case, 24/7. In all our banners, our smartphone applications are now widely downloaded boosted by the regular add-on of new services, features and specific advantages for our customers. This allows them to scan and pay for their products without waiting for a cashier and shop outside regular opening hours. This has translated into higher traffic and is expected to lead to more loyal customers and higher sales per customer. Our overall customer flow was plus 0.8% in Q4 despite the impact of the strikes. Our supermarkets registered plus 2.3% client flow in Q4. This should accelerate in the coming months with the rollout of the autonomous store concept. Second, our e-commerce activities are on a very good track. Share of E-commerce was 24% by Q4 2019 compared with 18% published last year. I have already mentioned Cdiscount, which has performed very well this year. Food e-commerce also posted an excellent performance, up 9.6% over the year, significantly above the overall market. This was due to a number of initiatives across our banners, including the Amazon partnership with Monoprix, which has expanded its operations with Côte d’Azur. Looking forward, we will benefit from the opening of the Ocado warehouse at the end of Q1, which will significantly improve the efficiency of the e-commerce business and bring Monoprix' offer to places where it was not available before. We are very excited by this development. Friends and family will be able to order on Ocado from March 22, and we expect this to be game-changing for Monoprix. Third, organic food sales amounted to EUR 1.1 billion in 2019. We have the benefit of our experience in operating Naturalia, which brings us the know-how in dealing with organic food suppliers and helps us design new private label products in all our banners, particularly in proximity and urban stores, which are benefiting most from this trend. We fully intend to further enhance our positioning in this fast-growing market, and we are starting opening new pure organic convenience food stores under a convenience banner, which are called Casino#Bio. Fourth, our B2B businesses have accelerated their development, in line with our plans. These are very valuable sources of growth looking forward. The contracts already secured will yield incremental profits in the coming year, particularly at GreenYellow, with a solar pipeline [indiscernible] to 451 megawatts with new projects in Africa, Asia, Latin America and France. Data monetization also had a strong year with sales up 51% at EUR 61 million, in keeping with our initial projection. Finally, our successful refinancing has significantly improved our liquidity. The average maturity of our credit line has been extended from 1.6 years to 3.6 years and we raised EUR 1.8 billion of new financing in the market, which allowed us to buy back bonds and extend our average debt maturity. We also remain fully committed to realize our disposal plan and further reduce our leverage. A last word regarding our EBIT guidance for 2019. This call is meant to discuss our Q4 sales, our books are not closed yet and our full detailed results will be presented at our annual results presentation. Based on the available information today, we can just give a first estimate of our France Retail EBIT, up plus 5% in 2019, with an operational margin up 20 bps from 2.9% to 3.1%. Our cost savings plan and our reduced exposure to loss-making stores have allowed us to improve our results while absorbing EUR 70 million of additional rents as a consequence of the disposal plan. With the bulk of the additional rents already factored in our 2019 results and the full year impact of our cost cutting and Rocade plan yet to come in 2020, this leaves us in a good position looking forward. Now to 2019 Q4 sales. Group sales were at plus 3.6% in organic, plus 1.6% in like-for-like. Total sales were minus 1.4%, including a minus 3.2% foreign exchange effect. In the fourth quarter, the retail market in France was rather heavily affected by transport strikes in the main cities. The impact was particularly strong in Paris and Île-de-France. Kantar registered a minus 2.8% decrease in FMCG, the worst performance over 3 years in December, due to the context of the strikes. In this context, our banners showed impressive resilience with increased client flow plus 0.8% and stable like-for-like in Q4, and our premium banners most exposed to the Paris area, actually gaining in sales and in clients. Three items are of particular relevance in this context and bodes well for our strategy of sustainable growth. First, as I mentioned at the beginning, we now operate more than 300 autonomous stores across all banners. We plan to accelerate the rollout of this concept, which was started at Monoprix and Franprix and which has been extended to supermarkets, hypermarkets and convenience. It has proven effective in boosting customer traffic with a 10% uplift in supermarkets and 5% in hypermarkets where the concept has been deployed. By the end of Q1, half of our supermarket and hypermarket network will be equipped, compared to 1/3 of supermarket and 1/5 of hypermarket at the end of Q4. This should benefit our total traffic and by extension, our sales. The rollout in convenience is more recent with 40 stores at the end of Q4. It is already providing a significant uplift in traffic and we will extend it further to our network of convenience stores. Overall, this is the main new feature of Q4 and we expect it to continue in the coming quarters. The recruitment of new customers, thanks to extended opening hours, where we have no real competition. These new customers then turn into loyal buyers in our stores, further boosting our sales without the need for costly promotions. Second, we continue to increase the digitalization of our loyalty programs with new features added to our apps, Casino, Franprix and Monoprix, and new partnerships built with merchants through our internal start-up MaxIt. Casino Max user sales represented more than 20% of hypermarket and supermarket sales over the last 2 months of the year. Among the new features worth highlighting, Casino Max has extended the concept of monthly subscription to that of a yearly subscription program, a unique feature in France. Third, our buoyant segments performed well again, plus 10% on food e-commerce and plus 6% in organic food. Increasing loyalty and purchasing frequency of our customers is key to our future progress. Successfully rolling out technological solutions in our stores, regularly upgrading our digital loyalty program, and broadening our offer in popular segments will all contribute to these foundations for growth. Now going through our different banners. Monoprix like-for-like sales grew by 0.2%, despite its strong exposure to the Paris area, maintaining a positive client flow even in December as recorded by Kantar. We had a positive dynamic in food and household products. E-commerce recorded double-digit growth, thanks to the expansion of the Amazon partnership to Côte d’Azur. Among recent innovations, the Beaugrenelle flagship store recently presented a new beauty concept in partnership with L'Oréal, which yielded a strong uplift. Naturalia continues to perform well, helped by 9 new store openings during the quarter. In total, the banner holds 93 autonomous stores. Franprix had plus 0.6% like-for-like growth, with positive customer traffic, despite being mostly exposed to the Paris area. Organic food sales grew by 16%. As announced last quarter, the nonfood offer has been expanded with new corners, Hema low price original design housewares in 58 stores; Le Drugstore Parisien beauty offer in 30 stores; and a selection of Cdiscount products in most of the store base. Stores that benefit from these new offers have delivered stronger customer traffic. And as this traffic translates into more loyal customers, the extension of these corners should contribute to sales in the coming quarters. We plan to open 80 Franprix stores in 2020. Casino Supermarkets recorded plus 0.4% like-for-like growth and plus 1.2% over 2 years. Thanks to the extension of opening hours in 100 autonomous stores, customer flow was up plus 2.3%, which bodes well for sales in the coming quarters as new customers turn into loyal ones. The Casino Max extra loyalty program, which provides a 10% discount over a month against a EUR 10 fee, accumulated 200,000 subscriptions over the quarter. This offer now features a yearly subscription option. Customers who subscribe to the program had a double-digit growth in their purchases. Buoyant segments also experienced a very good dynamic with organic food sales growth of 12% and e-commerce growth of 15.6% over the quarter. Géant Hypermarket like-for-like sales were minus 0.7% over the quarter. This performance includes a 5-point gap between the best and last quartile of stores, which is an important consideration in the context of our disposal plan. We have deployed our autonomous technology in 20 stores, allowing for openings on Sunday afternoon and during bank holidays, which translated into improved customer traffic for the banner in Q4. In nonfood, we have continued to develop a model the physical marketplaces with the rollout of corners operated by specialists. Physical marketplaces are both more profitable than traditional nonfood sales and more aligned to specific customer needs, contributing to the traffic in those stores. We will keep on rolling out these initiatives in the coming quarters. Convenience sales were minus 0.3% on like-for-like this quarter, plus 2.2% over 2 years. The mix has improved, with the share of private label up by plus 4 points. Autonomous stores are being rolled out as well, starting with 38 stores this quarter, with a positive impact on traffic that we see accelerating in the most recent weeks. And the new concept called Casino#Bio was launched during the quarter with more than 4,000 organic food references, including 700 private labels, taking advantage of the know-how developed through Naturalia. Let's move on to our new businesses, through which we leverage our assets and client flows to create value in B2B. GreenYellow accelerated its development in Q4 in solar panels as well as energy savings solutions. New solar international projects include the biggest solar panel shelter in Morocco with STMicroelectronics, which covers an area of 4,000 square meters; a project in Colombia with SEB group and a project on Roland Garros Airport in La Réunion. In France, notable recent projects include a 4.7 megawatt installation at the car racing circuit of Nevers Magny-Cours. GreenYellow also signed new energy efficiency contract during the quarter, among them, Samson Regulation, a player in mechanical and industrial engineering. In Brazil, GreenYellow has now completed 1,000 energy efficiency projects. New businesses were also added, such as the sales of green energy to corporate in Brazil, a new offer allowing customers to buy natural gas through Cdiscount, and a new partnership with Jedlix, a start-up specializing in smart charging to automatically recharge electrical vehicles when energy is the cheapest and generate reduced carbon dioxide emissions. In total, GreenYellow's solar pipeline increased from 150 megawatts at end 2018 to 450 megawatts at the end of '19, on track to reach its target of 950 megawatts by 2021. The pipeline secured today and its accelerating momentum gives us a high degree of confidence in GreenYellow's future profit growth. 3W-relevanC 2019 sales reached EUR 61 million, a 51% growth year-on-year, in line with our target. The partnership with Orange Advertising was awarded the LSA de l’Innovation marketing trophy. It allows the measurement of TV advertising impact on customers' buying habits, using a common set of Orange and Casino data. 3W-relevanC also received the data and creativity prize in the FMCG category for their precision marketing campaign to support the launch of the new Actimel products. Our ScaleMax data center business has secured contracts with several clients in banking, such as BNP Paribas and Natixis, and with start-ups specialized in artificial intelligence as well as 3D animation studios. While we compete against very large players in this business, we have several advantages. We capitalize on unused space with no incremental cost and reuse the heat generated by the cores, which are powered by GreenYellow solar panels. We're also among the very few French player in this market. This makes for a commercial offer that is both attractive for our customers and quite profitable. Moving now to Cdiscount. The detailed sales report was published on January 15. I will sum up the main highlights. This was another year of profitable growth for Cdiscount, which maintained over 9% GMV growth, with a marketplace share of GMV up 3.7 points for the year to 38.1%, in line with our plan to reach 50% market share -- marketplace share in 2020. This performance was driven by 3 main pillars: the sustained acceleration of the marketplace, the success of new B2B services, notably travel and European expansion. In Q4, Cdiscount registered a record-breaking Black Friday performance at EUR 73 million in one day, plus 27% versus 2018. Marketplace share of GMV was up 4.5 points during the quarter, in line with our targets. Overall, GMV growth during Q4 was 6.5%, including an impact of minus 3.4 points due to a no-hit video game market. Excluding this impact, GMV growth during the quarter was in line with the previous trends. Now to the 3 main pillars already mentioned. First, the consistent high growth of the marketplace. This has been driven by the rapid extension of fulfillment by Cdiscount growing 63% over the year. It now represents close to 1/3 of marketplace GMV. Third-party SKUs eligible for express delivery went from tens of thousands at the end of '18 to over 1 million at the end of 2019. This is a very significant transformation, linked to the logistics efficiency of Cdiscount and its base of loyal customers, which are made accessible to our best merchants through express delivery. This trend is set to continue in the coming quarters, reinforcing the share of marketplace and customer loyalty in a virtuous circle. Second, we have witnessed, again, a stellar performance of B2C services. Travel increased 49% between the first and second semesters and for the full year was 10x higher than in 2018. This reflects the impact of increased customer loyalty and new packages, including a partnership with Disneyland. Cdiscount Energie was up 86%. Ticketing was up 3.4x in Q4. New services are being rolled out regularly, and our customers can now buy a wide range of offers, making Cdiscount their everyday platform. Third, the international platform has expanded quickly with 85% GMV growth year-on-year in Q4. Cdiscount now delivers to 25 countries with 47 websites directly connected to Cdiscount at the end of 2019. The International Marketplace Network, which was launched in September has been joined by hundreds of sellers in the last 4 months. This alliance addresses over 230 million customers and offers a single, simplified seller interface. This is a major source of growth for Cdiscount customer reach, and it allows Cdiscount customers to choose their purchases from a far wider range of suppliers. These 3 pillars have contributed to the increased attractiveness of the Cdiscount à Volonté loyalty program, which now represents 36% of its GMV. It has grown 10% over the year, reaching more than 2 million members. At the same time, Cdiscount's brand awareness has strengthened with an improvement of 7 points and over 20 million monthly unique visitors. Overall, this quarter completes a successful year for Cdiscount and the foundations have been laid for future profitable growth, driven by the extension of our offer through international partnerships, increased customer loyalty and further transformation of the model into a platform of all types of services. Let's move on to Latin America. GPA has already provided a detailed report on its Q4 sales on January 15, and its earnings will be released on February 19. Éxito's earnings will be published on February 17. I will therefore highlight the main points. During the quarter, Latin America sales rose by 3.4% on a same-store basis and by 9.2% on an organic basis. Foreign exchange effects was minus 6.7%. We have successfully completed the reorganization of our Lat Am business. Casino owns 41% of GPA, which in turn, owns 97% of Éxito. This is a simpler, leaner structure and with the transfer of GPA to Novo Mercado in February 2020, the listed shares of GPA should become more attractive to international investors. In Brazil, GPA Food sales were up 8.4% on an organic basis over the quarter. Over the year, they recorded a strong organic growth of 10.3%. Assaí has accelerated its expansion this year with 22 new openings, representing an expansion of 20% in the sales area as the new stores are bigger. This is above our initial target, and the network now totals 166 stores. In Q4 alone, 13 stores were opened, a record. This has contributed to an impressive 22% growth in sales in 2019 on the back of a very strong 2018. Assaí has entered 3 new Brazilian states in '19, in keeping with its strategy to extend its national footprint. This confirms what we have been stating in the past quarters, Assaí has a lot of potential for further growth in areas where it was not present before, with even bigger and more profitable stores. At the same time, customer loyalty has continued to improve with a fast development of its Passaí card, now totaling 1 million active cards. At Multivarejo we have seen very good results in the store portfolio transformation project in all our business units, and we have put in place a strong process to ensure turnaround of extra hypermarkets. Pão de Açúcar, our premium banner, now includes 46 renovated stores representing 40% of total sales. Their performance was 7 points above nonrefurbished stores. We plan to renovate another 15 to 20 stores in 2020, coupled with the expansion of 5 to 10 stores. In supermarkets, another 33 Extra Super stores were converted to Mercado Extra or Compre Bem during the quarter. Over the year, 92 Extra Super were converted, resulting in a portfolio of 100 Mercado Extra and 28 Compre Bem stores. Both new banners posted good performance during the quarter, both in sales and client growth, with Mercado Extra up 5% in like-for-like and Compre Bem up 15%. The completion of the conversion of Super Extra stores to these new successful formats will be completed in 2020. Proximity stores recorded a strong plus 10% like-for-like growth on the back of a very strong Q4 2018, plus 19%, a testimony to the success of the new commercial strategy. The quarter marked the resumption or expansion in the format with the opening of 9 Minuto Pão de Açúcar stores. As for Extra Hyper stores, they have been segmented into 2 groups with dedicated governance. The first one includes high-performance stores, representing 70 stores, 2/3 of the store base, with good location and high customer traffic, for which a plan to further improve quality of service and optimize the offer is being designed. The second segment includes hypermarkets that are underperforming, which will be mostly converted into Assaí stores or in some cases, sold or closed. Once this process is completed, Extra Hyper will be on a stronger footing to deliver sustainable, profitable growth. Finally, GPA has showed solid progress in its strategic digital transformation initiatives this year. Food e-commerce was up 40% over the year, driven by the expansion of Express and Click & Collect delivery to 125 stores. James Delivery, registered around 35% growth per month and loyalty apps registered more than 11 million active downloads, comprising more than 20% of Multivarejo sales. In Colombia, Éxito delivered a robust growth, thanks to solid performance of the innovative formats, Wow, Carulla Fresh Market and Surtimayorista as well as the strong growth in its omni-channel operations and the strengthening of its digital transformation activities. To conclude, this was a year of transformation for the group. The successful refinancing, the good progress of our disposal plan and the acceleration of our digital and portfolio evolution initiatives, means that we are very well placed to compete successfully across our markets. In France, we are focused on strengthening our client base in our best-performing formats. As a result of the disposal plan, we have successfully increased our focus on our most attractive banners and are encouraged by the very good trend we are seeing in customer recruitment, despite the strikes in December. Looking forward, we are confident that our omni-channel strategy to drive more engaged customers will translate into higher sales across all our formats. I am now ready to take your questions.

[Operator Instructions] We have a first question from Arnaud Joly from Societe Generale.

I have 3 questions. The first one, so plus 5% EBIT growth in France, ex real estate gains. You had a previous target of plus 10%. So 2 questions there. What was this target of plus 10% restated from the change in consolidation for Leader Price? And where does the miss come from? Is it only strikes? Or do you have any negative factors? The second question, what about the other targets, particularly the EUR 200 million improvement for the WCR and the EUR 500 million free cash flow generation for France before dividends and financial charges? And last but not least, where did you land for the net debt for the French holding company at the end of 2019? And if you can clarify if the figure you could get is before or after the [indiscernible] statement?

Thank you, Arnaud. First question, so our guidance was 10% and we have reached 5%. So again, to remind that we reached the 5% growth on our legacy format, while absorbing EUR 70 million of additional rents. So we think it's quite a good performance. Even though in December due to the strikes, we had lower sales than expected, which explains the gap between the 5% and the 10%. This computation, of course, it's 5% based on the accounts 2018 restated. So we removed it [ outright ] from '18 and from '19. We look at our remaining banners and the growth is 10%. 10% the target, 5% the result. As for the other questions, as I remind you, this is a call about sales. We are very early in the year. The only number I have today is the number that I gave you, the number of EBIT. I don't have the other numbers. So I have no further comment on that at this stage.

We have a next question from Robert Joyce from Goldman Sachs.

First one, just -- I didn't quite understand the answer there. In terms of Leader Price, if you hadn't taken Leader Price as discontinued, what would the profit growth have been? Second one, given it looks like there's a lot of moving parts, and you noted a lot of new initiatives, a lot of store closures in the second half. Are you still happy that exceptionals are going to come in below EUR 100 million for the year? And the final one, I'm not sure what you can say on that, but the Rallye safeguard proposals that have been made. There've been a few questions about maybe that placing a big requirement on Casino to pay some material dividends at some point. I was wondering if you've got any comments on those proposals?

Thank you, Rob. First question. So again, Leader Price, we remove it from '18 and from '19. So it doesn't change the profit of the balance that we keep, and that is the relevant number looking forward. So we -- if -- to be precise we gave the numbers, 2.9% profitability in '18, 3.9% profitability in '19, and that is the growth of profits on the balance that we keep, excluding Leader Price. Leader Price, we think the right thing to do for Leader Price is to sell it. Why? Because we've seen France 2 markets which are polarizing -- increased polarization of the market between the market that's doing well, which is the big -- the cities, the demographic and economically dynamic regions where we are strong. And other regions where demographic and economics are not so good and competition is quite fierce and discounters are expanding. Removing Leader Price will increase our footprint in the best -- 3 best regions, where we will have 80% of our sales in these 3 regions. So that's it for this number. So again, 5% based on the EBIT published in '18, removing Leader Price, which is published in our press release. Exceptional, yes, we worked all the year, reducing our costs, reducing our exceptional costs, also controlling our CapEx and reducing our inventory, we did that over the year. Again, the detailed results will be published once we have them and once we post them. But at this stage, no further comments on that. And for Rallye, as a rule, I can't comment anything on Rallye safeguard [ of course ]. As far as Casino is concerned, our dividend policy has been set for 2020, that is 0. We will see later on what we will do. But at this stage, that's the only decision made for the dividend policy of Casino.

We have a next question from Maxime Mallet from Deutsche Bank.

My first one is with regard to France. So you gave some -- a new target for your EBIT growth and it's ex real estate contribution. So can you maybe provide the real estate contribution you expect for France this year? You also mentioned that you had some headwind this year in terms of margin notably coming from additional rents, but the cost savings should come in 2020. So do you expect the growth rate of your EBIT next year to resume back to like a plus 10%? That was the first question. The second one is with regards to your target on free cash flow. You mentioned before, targeting EUR 500 million of free cash flow for France this year. Is this target still valid with your new targets with regard to EBIT? And my third question would be with regard to the impact from strike that you've mentioned on sales, which is the reason why you've downgraded your EBIT target. Well, can you maybe quantify the impact on -- the impact coming from strikes on your sales, similarly to how you quantify the impact from the yellow vests movement last year on your sales?

Yes. Starting with the last questions, Maxime. The strike, of course, it's less straightforward than yellow vests [indiscernible] were blocked by yellow vest, [indiscernible] was not. This is an overall impact on the traffic of the customer in -- [ it's actually ] in Paris and in the France region. And if you look at the press, and you've seen the numbers that they are [ not e-commerce ] or other [indiscernible] published. There have been quite a significant impact from the strikes of the overall impact of the strikes on the commerce in [indiscernible]. And overall, in France, since [ the compound numbers ], they're not only concern the [indiscernible] they concern the whole country. So we think there's the direct impact of the strikes of people not moving, and there is the overall impact of this environment on the purchasing of customers. So this basically, you remember that in Q3, I said we expected an acceleration of sales in Q4, of course, that didn't happen. And I said that basically the gap that we explained -- that explains the gap in EBIT. So basically, we could have expected 1.5% to 2% growth in like-for-like sales [ -- in sales ], like-for-like sales in Q4, didn't happen. So we think that's exactly the impact of the strike from the -- the overall impact from the strikes around the customer purchasing habits. The other questions, again, we had this cost-cutting plan, part of which is realized this year. Remember, we said we would realize the EUR 200 million cost-saving plan, of which about EUR 130 million in 2019. We target -- we have the full year impact next year, of course, is part of this disposal plan was -- sorry, this cost-saving plan was realized in H2. And this explains why we will have additional benefits from the cost-cutting plan, while the rent are mostly already captured. So this is basically consistent with what we said before, and I have -- it's basically consistent with all our plans to cut costs and reduce our exposure to loss making stores. So basically, our profit should keep on improving from this cost-cutting program. The other questions relate to numbers I don't have, so I can't comment on that at this stage.

We have a next question from Nicolas Champ from Barclays Capital.

I have 3. The first one is a technical one. On Page 8 of your press release, you provide some interesting information regarding the Leader Price performance to help us to deconsolidate Leader Price. However, correct me if I am wrong, that none of the figure in the tables or regarding Leader Price says much loss in the press release, [ relevant ] press release. And the miss is quite significant, around 10% each time. For example, in Q1, you said that we should deconsolidate EUR 563 million, while I think it was EUR 543 million. Could you explain to me the discrepancy? The second one is about, could you -- so you did decide to deconsolidate Leader Price, so you should have a better visibility on the disposal process now. Could you please provide us more color on the time frame? Is it something that we should expect by the end of Q1? And the third question is about -- could you provide us the full impact for the French hypermarkets and French supermarkets in Q4, please?

Okay, Nicolas. For the first question, actually, regarding between Leader Price [indiscernible] and Leader Price including Geimex. Geimex is our business unit that exports Leader Price products. And this, we will keep on operating Geimex. So it's not discontinued. We'll keep it. It's not part of the disposal. We only sell Leader Price in France. So that explains the difference in [indiscernible]. As far as the disposal of Leader Price, I'm afraid I can't make more comments that I've already had. We have a rule that is we don't discuss the details of ongoing negotiations. But of course, the -- if we put Leader Price in discontinued, it's not only because we decided to sell it, but it's also because we are quite confident that this will come through in a timely fashion. As far as the full impact is concerned, I'll get -- I think we'll get back to you on that.

Next question comes from Xavier Le Mené from Bank of America Merrill Lynch.

The first thing, can you elaborate a bit more about the change in your guidance? As you said, December was quite weak. You [ missed the ] sales and you were expecting sales or like-for-like sales between 1% and 2%, which means potentially, let's assume 1.5%. You were losing [ EUR 65 million ] of sales. But the impact on profit is EUR 24 million, EUR 25 million. So the math looks quite stretched here. So a lot of profit for actually quite, in relative terms, small amount of sales. So can you elaborate on that? The second thing, just on Franprix, we've seen kind of a sharp decline of the new space contribution, actually. So it's a negative number. I understand that you have been franchising more stores. But overall, the net number has not [ shown ] that significantly. So what's your explanation there for the new space contribution, I would say, of Leader Price? And last point, if I do also a rough math calculation, would you agree that Leader Price EBIT last year was about EUR 40 million, positive?

Okay. So I think several questions, Xavier. First one, yes, if you take 2% of our sales in Q4, you get to about EUR 80 million. So that explains the gap in result of about EUR 25 million as you computed. So that is basically the impact of the missing sales due, we think, to the strike. Franprix. Franprix, we have -- I think you refer to the gap between organic growth and the like-for-like growth of Franprix. What happens is that as Franprix as you know, franchise model is often more efficient than integrated stores. So we -- as you may have seen, we have sold a number of integrated stores to franchises. And turned a number of integrated stores into franchises as part of the optimization of the network. And of course, once the store turns into a franchise store, we have less reported sales, though the profitability is generally the same or even higher. That explains at Franprix. And for the last questions, the last question you asked was, yes, the profitability of Leader Price, it's either -- we publish -- yes, your calculation is basically correct. The EBIT margin last year, we said was 2.9%, which means that if you apply that to the number we published for the sales, excluding Leader Price, you get to around the number to be exactly EUR 483 million, excluding Leader Price, that's the number last year, EUR 483 million. So plus 5%. That means this year, it's EUR 5 million or EUR 6 million, approximately, which you can compute from the profitability number we published. So yes, Leader Price was positive in EBIT in '18. But we think looking forward, the decision to sell Leader Price is consistent with our strategy, which is to focus our development on our best-performing formats and geographies. And again, selling Leader Price will allow us to have 80% of our sales concentrated in the 3 best regions.

We have a next question from Andrew Gwynn from Exane BNP Paribas.

Two questions for me. So the first is on the pace of asset disposals. Your EUR 2.1 billion signed. That's pretty much the same number as we had in July '19. So I'm just wondering why the slowdown in disposal program? Is it just simply timing -- it sort of [ takes some time ] on those? The second, just coming back to Leader Price, just to push you a bit more. I mean, obviously, there's a lot of noise in the press around potential disposal proceeds, which strike us as very high, but presumably, there's a lot more to the deal that meets the eye. And I'm thinking in particular around the -- how you deal with the franchises and so forth. So [ you have to take ] those in-house. So just so we don't get a sort of nasty surprise or a significant positive surprise when the deal is finally finished, can you just give some -- a little bit of clarity around some of the details [indiscernible] franchises and so forth?

Yes. Andrew, the timing of the disposal -- well, we were very fast in the first disposals. Of course, as you remember, we overdelivered quite substantially. We delivered the EUR 1.5 billion in 6 months instead of 1 year, and we started very quickly on the first part of the EUR 1 billion that we added on to that. First, we sold a lot of real estate. And now we're in the process of selling more businesses. Starting with Vindémia that we sold in July, and that we are going to close shortly. Of course, it takes, sometimes, a bit more time to sell a business than a pure real estate. It takes a bit more time. But of course, that doesn't change at all our very high confidence in the fact that we will have at least EUR 2.5 billion disposals end of March and EUR 4.5 billion the following year. So I have absolutely no worry about that. I'm very, very confident. Leader Price, I'm sorry, I really can't give you more detail. I don't expect any bad surprise from -- on my side. I can't comment on any numbers that circulates here or there, but we think that things are going to go in the right direction and in a timely fashion. And of course as soon as we can announce something, we will. I assure you.

We have a next question from Maria-Laura from Morgan Stanley.

Just one quick question, and apologies if I missed some of the other questions. But given the miss at the operating profit level with respect to your target. Just wondering if you can comment -- and also on the comments that you made with respect to the strikes in December, what other kind of comment that you can provide us with respect to working capital into year-end? And perhaps also on free cash flow for this year?

Yes. Maria-Laura, again, I will give the same answer I gave before, I don't have the numbers. We're working -- just one comment on working cap because we had -- last year, as you remember, we had a very negative impact on working cap due to overstock that we have to do in the stores in response to blockade, blockades of the warehouses, blockades of the stores. So we had a lot of excess inventory because of that. On the operational side, I can tell you that did not happen this year. So we did not have this kind of perturbations of blockades or anything. So no need for overstock this year. That's all I can tell at this stage.

We have a next question from Maxime Mallet from Deutsche Bank.

Well, I had, basically, one left. You were talking about Cnova, and the change you're making for your business, the growth of the marketplace, notably. I was just wondering whether you expect Cnova to be breakeven this year?

Actually, Cnova, they have already confirmed that they had reached their objectives in their press release. If you look at the wording in their press release, they stated that their goal of increased profitability this year was reached. The profitability improvement expected in line with full year target that's what I can read in their press release. So I think that answers your question. Thank you. Yes, that was the last question. So we're going to stop here, and thank you all for your attendance to this call, and good evening.

And have a good evening, everyone. Thank you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.