Q2 2015 Casino Guichard Perrachon SA Corporate Sales Call
Jul 15, 2015 AM CEST
CO.PA - Casino Guichard Perrachon SA
Q2 2015 Casino Guichard Perrachon SA Corporate Sales Call
Jul 15, 2015 / 04:30PM GMT
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Corporate Participants
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* Antoine Giscard d'Estaing
Casino Guichard Perrachon SA - CFO
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Conference Call Participants
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* Arnaud Joly
Societe Generale - Analyst
* Edouard Aubin
Morgan Stanley - Analyst
* Bruno Monteyne
Bernstein - Analyst
* John Kershaw
Exane BNP Paribas - Analyst
* Andrew Gwynn
UBS - Analyst
* Fabienne Caron
Kepler Cheuvreux - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, welcome to the Casino 2015 Second Quarter Conference Call. I now hand over to Antoine d'Estaing, CFO of Groupe Casino. Sir, please go ahead.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [2]
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Thank you. Good afternoon, everybody. Thank you for joining this conference call on our Q2 2015 sales. I will first start with the quarterly performance at Group level, and then discuss each of our five reporting segments.
Let's start with the Group sales. The headline numbers, so the total Group sales in Q2 amounted as you can see on the press release, to a little less than EUR11.8 billion. In France we enjoyed a recovery of our sales. International food retail operations grew nicely. Growth was very rapid for our E-commerce division. While the electronics business declined significantly in the quarter.
Overall, ForEx had a negative impact on total Group sales of minus 2.8%, mostly due to the depreciation of Latam currencies. The calendar effect was negative at Group level, 0.7%, almost flat at 0.2% for France.
So at constant scope of consolidation and currency rates, organic growth adjusted for calendar and fuel was almost flat, minus 0.4%. For the first time since Q3 2011, we posted a positive organic growth in France of 0.4%, with sales of EUR4.7 billion, and like-for-like slightly positive at plus 0.1%.
Organic growth in Latam Retail plus 6.1%, was similar to the previous quarter. And this is on the back of a very strong base last year, just before the World Cup. You'll remember that during the same period last year, Latam Retail grew at 12.2%.
Organic growth in Asia was minus 1.6% in the soft economic environment. Total sales once translated into euro, showed plus 20% growth, thanks to the revaluation of the Thai baht, mostly.
E-commerce sales kept growing fast, in the high-teen area. The marketplace has increased in size in Brazil and France. The gross merchandise volume increased plus 25.8% at constant currencies.
Electronic sales in Brazil were down organically 21.8%, under the combined effect of a high base of comparison and the current economic downturn in Brazil.
So altogether, international sales amounted to EUR6.2 billion. This is 53% of our total Group sales. And if we exclude the electronics business of Via Varejo, in which as you know our share of interest is limited to 18%, international sales grew 4.6% organically, which is a good performance in the present environment.
So I will now discuss-- this is the overview from a Group perspective. I will now discuss the changes for each of these five segments in more detail. And I will start with the performance of our retail operations in France, of course excluding E-commerce.
Let's start for food retail France with a couple of remarks on our trading environment in the second quarter. If we look at prices, prices were still negative year on year, from the 0.9% in hyper and super. These are data published by (inaudible). Food prices were down 0.7% year on year in June. And this is better than May and April when they were down respectively 0.8% and 1%. And this does show that most retailers have kept their prices stable for a while now. And this should result in progressive stabilization of market prices.
Consumption was relatively soft April and May, improved slightly in June. For the full quarter, as you might have seen it in the [Bonde France] data. Food retail sales were flat in value. This is for the market. So in this context, we are happy to report for continued positive sales number for our French operations, with an organic growth of plus 0.4% in this quarter, where price reductions implemented last year continue to weigh negatively for around 1.7%.
Footfall increased at 2.4% for all the French operations, with volumes up 1.8%. It's important to stress that all but one of our six French banners enjoyed sequential improvement of their like-for-like. So this first sign of return to positive growth in France in sales is mostly the result of the performances at Geant and Leader Price. That is where we implemented significant price cuts over the last two years. And (inaudible) we begin to see there are some benefits of our pricing strategies.
More important, given the momentum we saw in Q2 in clients and volumes, we can expect a stronger sales number in the next two quarters, as the price cuts will progressively be fully annualized.
Let's go now more in detail for each of the banners. For Geant, clients grew 4%, volumes by 5% in the quarter. Price investment was still significant. Price investments of the previous year had a negative impact of 1.8% in this quarter. Food sales were up 4%. This is an excellent number that demonstrates that our competitive prices are now fully acknowledged by our clients. A lot of commercial niceties that had a positive impact on sales and resulted in this number.
Non-food sales were negative, but in the low single-digit area. Adjusted for price investments, sales growth in non-food was close to zero. And here we see the benefits of combined operations we set up with Cdiscount, and successful private sales in June.
If we now move to Leader Price, the like-for-like sales have recovered significantly in Q2. We're almost flat, as you can read in the press release at minus 0.9%. Same store traffic and volumes were up 7%, and 1.3%, respectively. During the quarter assortment has been renewed. In-store experience has been improved with less out-of-stocks, shorter [wait] time at checkout. So a lot of actions have been taken to increase the in-store experience. The banner increased its market share by 0.2 points in the last [counter] measure. And the banner has now 1,225 stores, including the affiliates and the Leader Price express stores.
Supermarket Casino, like-for-like sales were down 2.3%. And sales were down 3.7% organically. This last number being most explained, as in previous quarters, by banner migrations from supermarket to Monoprix of a certain number of stores. Comparable sales were still impacted by past price cuts. Important to see is that traffic has improved sequentially during the quarter, and the banner is now [progressing] its (inaudible) around assortments in fresh and improvement in services.
I'll move now to Monoprix. Monoprix continued to perform well in Q2. Organic growth was plus 2.3%, and like-for-like sales increased sequentially. Traffic was positive in Q2, and volumes kept growing at 0.8%. So both food and non-food sales were positive, and better than the last quarter. And apparel sales were positive in an environment which is not easy, driven by successful private sales. Expansion was steady, with 11 stores opened in Q2, and Naturalia organic that were opened, it's one of the stores in May.
Move to Franprix, where total sales are still impacted by the last store disposal having been requested by the French Competition Authority, which we've been doing over the last 12 months. So the organic growth is impacted by this, as well as price and [concessions] in two LP stores. Like-for-like sales were a little better than the last quarter, supported by an improvement in traffic. And this trend is expected to continue in the coming months, with the deployment of the new Mandarine concepts, which already proved its relevance in Q1.
The renovation target hasn't changed. We aim at renovating 45% of the network of Franprix that we see from the pilot that this gives a very good uplift.
Convenient stores in the [Casino] format in which we include here the Leader Price Express sales as well as sales by Petit Casino and Casino shops, Vival and Spar. This business together kept on growing this quarter at a very nice pace, with like-for-like sales 7.5%, better than in Q1, driven by increase in traffic of 13% and good volume growth. So these numbers were driven by the network renewal initiatives, transformation of Petit Casino into Leader Price stores. We are very happy with this performance.
I'll move now to the international operations, and the first segment is Latam Retail. As you can see, it's in Q2 our total sales for Latam Retail amounted to EUR3.9 billion. This is 33.5% of our business. Total growth for this segment was 3.7%, with solid organic growth of plus 6.1% and 2.4% for like-for-like.
If we zoom on Brazil, the food business registered a good performance with a very high organic growth, 7.3%. And this is despite, as I've mentioned it already initially, despite the very strong comparison base, and despite a more difficult macroeconomic context. We are happy to see traffic growth in Brazil of 4.8%.
This recovery of traffic is important, specifically compared to what happened in the previous quarter. This is mostly explained by an improvement of the banner's competitiveness and the impact of the (inaudible) of several stores. Assai business is still doing extremely well. The banner posted excellent sales, with like-for-like outperforming inflation, and global market share gains.
Exito's organic sales in Colombia were positive, and traffic increased. And we had very good performance both in Uruguay and Argentina.
I'll move now to electronics in Latam, where the sales amounted to EUR1.3 billion. It's 11% of our total Group sales. Sales were down significantly, 21.8% organically, 23.6% like-for-like. This is mostly the result of two elements. The first one is a very strong comparison base last year before the World Cup, which penalized very heavily a certain number of product families like TV sets.
And the second element is the macroeconomic slowdown in Brazil, which has led to a sharp decline in purchases of durable goods. And probably the decline can be split under those two reasons. Despite this context, Via Varejo continued to gain market share, reaching 26.1%, and 18 new stores (inaudible).
Move to Asia where total sales amounted to EUR1 billion, a little more than EUR1 billion, 9% of Group sales. That business grew 20% with a positive impact of ForEx. In Thailand we see continued posting of positive trends, and volumes and traffic was sustained. The economic slowdown in Thailand led to a decline in purchase sizes. Excluding calendar, organic growth was minus 1.6%, like-for-like minus 2.4%. Expansion continued with 22 openings, and again, this year Big C has been recognized as Thailand's most favorite hypermarket chain. Organically, Big C Japan showed positive volume in the quarter, and favorable expansion.
I'll move now to our last segment, which is E-commerce. As you know, Cnova has published their sales last Friday. So this is just a wrap-up. Volumes amounted to EUR1.1 billion in the quarter, an increase of 25.8% on a currency-neutral basis compared to the same period last year. Marketplace GMV as a percentage of total of GMV reached 18.9%. This is up 8.8 (inaudible), and it's up 13 basis points compared to the second quarter of 2014.
As reported by Cnova, net sales totaled EUR837 million. That's up 17.5%, once again, on a currency-neutral basis. Very significant is the increase of traffic. Traffic was up close to 39% compared with the same period one year ago, with nearly 400 million visits in the quarter. And this was due to both Cnova's price positioning in its markets, and the growing success of click-and-collect delivery options. Now the company has more than 3,650 click-and-collect pickup points, a unique position in these two markets.
Before I move to the Q&A session, I would like to conclude with the following remarks. The first thing is in Q2 we operated in an environment which was soft in France, quite challenging in Brazil, and our global performance is impacted by the decline of electronic sales in Brazil, and to a lesser extent the negative ForEx in Latam.
If we exclude Via Varejo, our organic growth would be around 3.6% in Q2, after 3.4% in Q1, excluding Via Varejo as well. So this is a relatively stable and solid performance.
A couple of other important messages, in France we see that our banners attract more clients. These clients are now buying more items. So we are confident that sales will follow in the second half of the year, after the full annualization of price investments. Current trading is favorable. So we are confident in this recovery of sales.
The second remark is on Brazil. So despite uncertainties in the Brazilian environment, our food business has shown a good resilience, with sales numbers pretty similar to those of Q1. We maintain a very strong price competitiveness, and our footfall has started to increase. So this is a positive momentum here as well.
Other international operations have strong expansion plans, and we're therefore quite happy as they are today. And last element is Cnova's business model continues to deliver superior growth, top-line growth, with excellent volume numbers, thanks to the fast expansion of the marketplaces.
One last word on our 2015 full-year trading profit, the consensus stands today at EUR2.130 billion, and we consider this number a realistic one at the present ForEx level. So these were my comments on this press release. And I'm now happy to answer your questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions). Arnaud Joly, Societe Generale
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Arnaud Joly, Societe Generale - Analyst [2]
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Yes, good evening, Antoine and Regine. I have three questions. The first one on the environment in France. Antoine, you mentioned a kind of stabilization of market prices. But Leclerc seems to be a bit more aggressive on promotions for now two months. Do you have evidence of growing promotional activity in France?
And the second question, regarding the synergies, the purchasing synergies thanks to the agreement with Intermarche, at this stage do you have a clear view of the amounts that can be expected for the full year, or is there a significant part linked to some full-year volume targets?
And last question on Brazil, and more specifically on Via Varejo. What will be the priority for the coming quarters? Will it be top line or margins? Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [3]
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Thank you. By definition, it's always very difficult to get a full vision on promotional activity, if you take a very short period of time. You need to step back, and take a global view. I don't want to elaborate on one single competitor. What I could say is our own promotional activity has been relatively similar to the previous year. So I don't think this is a big change here. Promotions are part of the business model of hypermarkets. You need to have them. They are part of what people expect to get.
Now we all know that in the past a lot of retailers, when they were a bit lost with the price levels, and turned into massive promotions and endless operations, which at the end were extremely difficult to read by the shoppers. So we tried to maintain the right balance of a certain level of promotional activity, similar to what we had last year. And they are good permanent prices. So the first top priority for us is at Geant is to stay as competitive as we are.
Now on this front, when we look very carefully what has happened in the recent month, globally prices have been relatively stable, our own prices have been stable. So I think clients and our indices have been stable. So I think clients, there's no additional round of price investments by competitors. So that's my answer on your first question.
On the second question, our agreement with Intermarche is an agreement where, by definition, we get purchasing conditions for a certain number of most of our suppliers of national brands. I will not enter into too many details, which are by definition very business sensitive. But you can expect the gains to be linked by themselves to the volumes you purchase. As you know, the second half (technical difficulty) is when we have very good prices the second half of the year for most of these product families. And again, will be more significant in H2 than in H1, where it was very limited, not the least because the new price list with suppliers were established as of April. So most of the benefits we expect to get, we'll get them from the second half of this year.
On Brazil, the strategy at Via Varejo has been to adapt to this environment. So you need to do both. I mean you have to be active on the top-line front. You have to be active on the profitability front. On the top-line front, the priority has clearly been to optimize the network of stores to do a certain number of pilots, to for instance, improve the offering in furniture, which is probably a very interesting category even in the present environment.
So there are several initiatives on the layout of stores, the assortment of stores. There's another initiative around migrating some of the more premium stores under the Ponto Frio banner into a more popular offer, like-- not Ponto Frio, [Casas Bahia] sorry. And this is underway. So we are working on a regular basis, how to best optimize the network of store. So this is for the top-line initiatives.
Then on the cost front, the Company has started to adjust very fast its cost, and has started to adjust its labor very actively from the end of this quarter. So the benefits, this very strong action on cost will be seen more probably in the second half of the year.
The last element is when the environment is tough if you are the market leader, as is Casas Bahia or Via Varejo, it's the right time probably to gain market share. Because other players will probably be having a difficult time.
So not one single solution, not one single bullet. Top priority is to get stronger out of this crisis, with the best possible assortment in stores, the best footprint in the stores, and a very good execution and a very good cost structure. Once again, it has started from Q2 with very active measures to reduce the direct labor in stores.
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Arnaud Joly, Societe Generale - Analyst [4]
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Thank you, Antoine. And just to confirm the level of consensus you mentioned is EUR2.130 billion, right?
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [5]
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2-1-3-0.
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Arnaud Joly, Societe Generale - Analyst [6]
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Okay. Thank you very much.
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Operator [7]
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Edouard Aubin, Morgan Stanley
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Edouard Aubin, Morgan Stanley - Analyst [8]
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Yes, good evening Antoine, and welcome back, Regine. So just two questions from me on consensus on Monoprix. So just to follow up on the consensus figures. Because on Thompson I see 2.160. I know it's a small delta. But if you look at the EUR30 million delta, is it mostly on France, i.e. could we see an EBIT at [400] to slightly below that level for the full year? And also talking about consensus, if you could give us a sense of financial expenses for the year, if it's going to be plus or minus EUR600 million?
And just on Monoprix, because I guess your like-for-like was quite decent this quarter. But you talked about price investment at Geant and Leader Price over the past two years. Monoprix, I guess, is around two thirds of your EBIT generated in France. If I look at certain third-party sources like IRI or (inaudible), it looks like over the years, your price gap to the price leader has increased quite substantially. How comfortable are you with your price level at Monoprix? And I know you really don't comment on competition, but do you think (inaudible) converting the DS stores in the Paris area could be disruptive over the next few months?
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [9]
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On the first subject of consensus, this is the EUR2.130 billion is really the average over the last 21 or 22 analyst research. So it may happen that between some sources, all the analysts have been included or not. And so for me it's just a question of sample, and our sample is of the last 21 analysts that follow us. So the EUR2.130 billion we think is the right level as of today.
On financial expenses, this is not the objective of this call as such, because we are here to discuss the quarterly sales. We will gladly finish and give many more details around the end of this month, when we disclose the H1 results. And gladly finish and provide and update on how we see the rest of the year for the Company.
Now back to your question on Monoprix, I think the best answer to your question is in the template you see on page 2. The thing which is very important for Monoprix is to keep attracting new clients and being positive in clients, which was the case in Q2. As you see, the Monoprix client base increase 0.4%, and the volumes were up 0.8%. So we are relatively confident that the banner still has its unique capacity to attract customers, for reasons I will explain. The right KPI here is really the number of clients.
Why are we confident that Monoprix is a model which is difficult to replicate? For a couple of reasons, very good locations, unique banner image which is probably different than other traditional supermarkets, food supermarkets. Monoprix is not perceived as a food supermarket. It's a more complex model, in which the assortment is very important.
Last but not least, it would probably-- it's always possible for everybody to start to try to copy Monoprix. But Monoprix, has in its DNA has some specific features which are difficult once again, probably to replicate. Its assortment is very original. It's [huge], especially in the non-food categories, very fast and very efficiently. We think this is where it's a different business than traditional supermarkets.
And one last word here, Monoprix I think, as you know, Monoprix is very cautious to constantly reinvest in the business itself. So we are constantly reinvesting in talents, in people, just to keep those differentiating factors. And once again, so far Monoprix is capable to stay at their unique banner, very different from other pure food retailers. So we are confident here.
On the price positioning of Monoprix, the management of Monoprix is watching very carefully their price indices. They are constantly working on initiatives that can bring value to their customers. So the private label is a very good way of offering good prices for a lot of product families. And the recent introduction of P'tit Prix has been very successful in volumes. It's a good sign that management is always very careful to strengthen the price image of the banner for the food products.
So all these things together, we think we have good concepts. And we want to keep our competitive advantage here. And the best demonstration of that would be the growth in sales. Now if you look at the organic growth of Monoprix, you see that organic growth was a very solid plus 2.3%. This is the like-for-like that I have mentioned. And this is as well the result of expansion and transformation of our best sites of (inaudible) supermarkets into Monoprix stores, introducing the food concept of Monoprix in very good locations.
So the numbers of Monoprix were solid in Q2. And we expect them to be solid as well in the second half of this year.
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Edouard Aubin, Morgan Stanley - Analyst [10]
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Okay. Thank you so much.
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Operator [11]
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Bruno Monteyne, Bernstein
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Bruno Monteyne, Bernstein - Analyst [12]
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Hi. Good afternoon, Antoine and Regine. Three questions from me. When I look at those numbers for Franprix on your page 2, I sort of noted that customers and volumes on same-store basis are improving quite a bit sequentially quarter on quarter. But your sales hardly improves at all, same-store, quarter on quarter. Is that implying you started sort of some new wave price (inaudible) in Franprix, and it's sort of the next format or channel where you're going to do these kind of aggressive price actions, or is anything else explaining it?
The second question is around Super Marche or Supermarkets Casino, where you still have worsening same-store growth, you haven't really spoken so much about the role of them in [Fran]. You normally often talk about [ID] or a discounter, or your service concept, or your convenience. How do you sort of position-- what do you see the role of Casino, and is there still much more work to be done, similar to what you've done in Geant?
And my last question is around-- you're talking about these store closures that were requested by the Brazilian Competition Authority. Can you sort of give an estimate of how much that's impacted the Latam sales in Brazil please? Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [13]
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Okay. On Franprix, there's no major impact of price changes. Franprix is a city center banner. And the value proposition is not only on prices. And therefore we have not changed automatically the prices. So what you see are total comparable sales for Franprix compared to client is more a subject of basket size, a little bit of mix. So it is nothing-- it's not mostly explained by price reductions, which have not been as significant here as they've been in other banners.
Now what's more important to explain is that when you renovate convenient stores like Franprix, and this is what we've been doing, we've been starting in the first half of this year, we immediately see some benefits. So the comparable number you see in Q2 is a number which has not seen yet the impact of the renovation of the stores in Mandarine.
And when we look at the first results, we had 10% of the network, and at the end of Q2, it was quite encouraging. So we'll have a second half of the year when we'll renovate massively the network of the Franprix stores. And we expect from that a significant uplift, in the high single-digit to low double-digit area. And if you apply by definition this type of uplift to a bigger portion of the network, you will have a positive impact in sales, we hope, going forward.
The feedback we get-- I'll say that what we can learn from the stores that have been renovated with more service, is that we get a very good trend in comparable sales as well. So this is for Franprix.
Supermarket Casino is a supermarket concept. So it's basic supermarket, where we have done some work around prices. We didn't discuss that a lot, because it is less significant at Group level than it was for hyper or Leader Price. But we have reset the prices. We already have a very good competitive product label. But we've reset the prices for the top-selling SKUs, and we are comparable to our peer group of supermarkets for the top 500 best-selling SKUs.
So we don't think the subject as such, once we've adjusted those prices for high rotation SKUs, we don't think that the price is the subject that we need to address. What we need to address now at Super Marche Casino is probably a mix of a better concept. So we probably need to renovate, likely we've started for Franprix. And we probably need to work more on the subject of in-store experience, service, quality of assortment; quality of fresh.
So this is one of the priorities of the management at Casino in the coming quarters, to improve the situation at Super Marche, which is the BU where the improvement has not been significant so far. We can probably allocate more management time to that, since the other French business units are on the right trend.
One last word I wanted to mention on Franprix, on Franprix the organic growth was impacted once again, by the last disposals requested by (inaudible). From the second part of this year on, we no longer have this negative impact. So here again, comparable will be better, and organic will be better. Because we'll be positive-- net positive in expansion for Franprix.
So as you can hear from my voice, we think we are relatively-- we have in our toolbox, so to speak, the actions we should take to improve Franprix. For Casino Super Marche, it's probably more an execution issue than a strategic issue.
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Bruno Monteyne, Bernstein - Analyst [14]
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Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [15]
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Thank you, Bruno. I'm sorry, Bruno. I missed your last question, in terms of the impact, it's less than 1%, less than 1% for the impact of the disposals requested in Brazil for the electronics business, for the authorization of the (inaudible).
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Operator [16]
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John Kershaw, Exane BNP Paribas
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John Kershaw, Exane BNP Paribas - Analyst [17]
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Good afternoon, guys. Just a couple from me. First of all, perhaps can you talk a bit more about what you're expecting in H2 in Brazil, both from a macro level, and at a retail level for your sales? I think particularly within the EUR2.13 billion consensus you're comfortable with, what are you assuming, or what should we assume directionally happen in Via Varejo, both in terms of like for like, and say, profitability?
Like last year, I think Via Varejo made a greater than 10% EBITDA margin. Can you sort of give us any color on how painful the profit impact may be? And secondly, just broadly extending to whether you expect weakening consumption to impact in the food business.
Secondly, just on Leader Price, obviously you're getting a lot better traction there. Traffic up 7%, but the volume is only up about 1%. So it sounds like the basket is down quite significantly. Is that just because it's new customers that are trying out the store, or is there some other factor?
And finally just help us more broadly understand your tables. If I look at some of the numbers, look at the like-for-like sales and the volumes, seemingly you're seeing 17% deflation there in convenience. Yet you're only seeing 2.5% inflation in GPA food, which when the market is running at about 8% or 9% inflation, that seems an extraordinary inflation number. So perhaps just educate us on what you're actually showing within these numbers.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [18]
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Yes, sure. So on H2 in Brazil, it's by definition very tough to develop a full scenario. What we can say is that for food, the business has shown a good resilience in Q2 compared to Q1, and very strong business in cash-and-carry, and an improving situation for the other food format. So food is a resilient business. We think it's likely to stay relatively resilient in the near future.
Now everything being equal, so it's very difficult for us to elaborate. I think it's a solid business. It's shown its resilience. And we don't see reasons why this should be very different. We have a lot of initiatives underway in Brazil. We have important initiatives to sustain the top line, mostly around renovation of stores. I think GPA has mentioned them. So we have renovations for the best hyper, around 40 of them. That's a third of the network.
We have renovations for supermarkets as well, around 30 to 40 of them as well. So these renovations have just started. So we've done the pilots. The pilots have delivered good results. And the pilots are now being rolled out, so to speak, with a much deep renovation of the network of stores. Although it's always favorable to the same. So that's one of the priorities of the food division in Brazil in H2, renovation, better stores, a lot of store excellence matters like better stores, like checkout time and things like this.
So this is underway. The management we have there has already delivered good results, and the best results you see it when you look at traffic. If people go back to your stores, it's difficult for you to say in advance whether they will have reduced the basket size or at what time of the cycle they want to spend more. But the fact that the clients are back to your stores is a good sign. So we are relatively confident on the food business as we speak, because of all these initiatives.
The last element which is important is-- and you remember that we were hit in Q1 by strong inflation in labor costs. It has benefits in other costs. So this inflation is high at the beginning of this year. And it's been decided to reduce cost to address the cost base very aggressively, so as to get all these costs under control. And we will probably-- so we started a lot of plans. The business unit has started a lot of plans in that respect which should deliver in the second half. So this is for food.
For non-food, I think it will be interesting to see in the coming quarter, if the assumption that we have, which is that Q2 was abnormally low, or the change was exceptionally negative, because this was on the back of a very strong comparison base. And we should probably have a scenario where sales are declining less than what we saw in Q2, significantly less.
And once again, the comparison base is far less demanding from the middle of July onwards. So it's unfortunately a bit too early for me to elaborate. We only have one week fully comparable after the World Cup, which as we all know ended at the beginning of July. It seems to demonstrate our theory, which is one suggested for this big boom before the World Cup. The trend is far less negative.
Here again, I discussed I think the initiatives, some initiatives on the footprint of stores, the assortment of stores, the location, the type of products you sell, and a big, big strong initiative to reduce your cost base. So this is for Via Varejo. By definition, there is probably more volatility here. But here again, we have many levers to activate in this business, which is a solid business, and where you can probably optimize your cost base.
At Leader Price, I think your question was- why is the volume growth not comparable at this stage to the number of clients. I think your assumption is right. We've seen that as well in the past for Geant, when Geant was back in positive territory. People start to come back to your stores just to check. And by the way, they have smaller baskets, as you know, in discount stores than in hypermarkets. So they come more often. But it takes a short time for them to really buy bigger baskets. So you need to be patient here. You need to communicate efficiently on your prices.
By definition, here again, you have a lot of work on the assortment, and progressively you should see stronger improvements in the volumes than what you have in Q2. Once again, we have a lot of clients in stores. That's very good. We need to transform more and more. We've started to transform better. You remember where we come from. We still have a very negative impact of price cuts, certainly in price in Q2. That's going to be far less the case in Q3 and almost neutral in Q4. So let's wait and see. And volumes will progressively catch up I think.
I think your last question was on Brazil and on the fact that we are relatively aggressive on prices or if we put it in another way, we don't price like inflation. I think it's the right thing to do to stay competitive, to show very good prices. So by definition, your top line has growth which is below inflation.
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John Kershaw, Exane BNP Paribas - Analyst [19]
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I suppose just the magnitude to which it looks to be below inflation. Because I think particularly with Assai, more commodity prices, a bit more inflation-- the macro--
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [20]
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Yes. But if you look at the combined number-- you have the clue here, John. If you look at the combined number, the combined number is a number in which you have a very strong mix between the two banners. So you have the strong mix of having a business like Assai, where the price per units are much, much, much below. So you are comparing-- you are adding pears and apples here. Because the volumes you add when you add volumes of (inaudible) products in hyper with the volumes you have in the cash-and-carry, on a combined basis by definition, this gives you a very negative mix for annual sales.
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John Kershaw, Exane BNP Paribas - Analyst [21]
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So what was the inflation you're experiencing? Because 2.4 is implied in the headline figures doesn't feel like the right number.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [22]
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No, no, no, no, no. Food inflation is more like 7% to 8%.
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John Kershaw, Exane BNP Paribas - Analyst [23]
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Okay. That's clear. And just coming back on if you can give us any guidance, because obviously there's a lot of uncertainty around Via Varejo. Do you expect in the second half to be able to broadly hold onto its margins, as reported previously? Or should we be assuming quite an operational degearing, even with the cost cutting?
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [24]
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I don't want to be too specific here. Because it's probably not the purpose of this call, which is on sales. I think what's important-- the important message of today is the level of decline in sales we saw in Q2 for Via Varejo is probably very-- is we think not representative of what we should see in Q3 and Q4. In Q3 and Q4, we think the decline should be much less important.
We'll have some impact of price cuts and probably GPA will be more vocal on this once they publish their first half results. If you combine the top-line equation with some cost-cutting initiatives, you can probably get a vision of where there will be margin in the second half.
But once again, I don't want to do this exercise today, not the least because Via Varejo is a listed company. It's more for them to fully guide the market on where they will go in the second half. My message was let's be realistic. That Q2 was abnormally soft, so to speak. It's going to be much easier from a comparison base angle in the second, and be aware that the BU has started very ambitious cost-cutting plans that will deliver in the second half.
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John Kershaw, Exane BNP Paribas - Analyst [25]
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Okay. Thank you very much.
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Operator [26]
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Andrew Gwynn, UBS
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Andrew Gwynn, UBS - Analyst [27]
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Hi, just in the interest of time, then maybe just one question. Just on the H1 profits, I'm wondering if you have a consensus on that yet. And is it possible to give us sort of regional split, if you see any consensus on that. Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [28]
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I don't have the consensus, not the least because there are very few of you who actually give a full detail on H1. So I don't have the H1 numbers. By definition, we are in the process of closing the books. So I don't have them as of today. And sorry I can't give you more details here. The important thing is I think you know them already, or I think we disclosed them already at the end of Q1, the strong impact of France of the reduction in prices which [still weigh] in H1, and the macro in Brazil, which you can see in the numbers.
But I've no specific number to give to you as we speak.
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Andrew Gwynn, UBS - Analyst [29]
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All right. Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [30]
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In the interest of time, probably I will take one last question. And once again, sorry for being a bit too long in the answers. If there is one last question, I'm happy to answer it.
If no questions, thank you very much for your time and patience--
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Operator [31]
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We have many questions yet, excuse me. Fabienne Caron, Kepler Cheuvreux
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [32]
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One last question.
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Fabienne Caron, Kepler Cheuvreux - Analyst [33]
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Yes. Good evening. Antoine, quick question, two if I may. On deflation in France, you said minus 1.8% for Geant. But what's the different with the minus 3% that is implied in the table for Geant if I compare the volume and the like-for-like?
And the second one, can you tell me what's happening in Corsica? Why do you stop taking Corsica, and it implies as like-for-like, [and trend] is strongly negative in Q2? Thank you.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [34]
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It doesn't change dramatically the picture. The idea was to show on the Geant stores, which have a consistent realignment in prices, the impact of that. So it's more to give a full visibility on the strategy of the Geant stores. The few stores we operate in Corsica have a different profile, so nothing else than that. It's just to show on Geant itself, on its pricing strategy what we get as a result. By definition, when you look and compare the two lines, the difference is not very significant.
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Fabienne Caron, Kepler Cheuvreux - Analyst [35]
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Yes. But actually there was no difference in Q1. (Inaudible) it was the same profile. But then your profile started to diverge from Q2. That's why I'm just wondering what happened.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [36]
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It was a little more difficult in Q2 in Corsica than in Q1. That's the answer.
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Fabienne Caron, Kepler Cheuvreux - Analyst [37]
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Okay, so nothing specific?
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [38]
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Nothing specific here, no. When you compare volumes and sales--
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Fabienne Caron, Kepler Cheuvreux - Analyst [39]
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Like-for-like.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [40]
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Yes, but you get mix as well. So the overall impact, by definition, is a combination of your price reductions and price reduction is such the number I gave, which is more like 1.8%. The global impact between volume and sales in this you have the mix, and you have the mix of all product families, and especially the mix of food and non-food, and all these items.
So the difference between volumes and sales is a proxy, but only a proxy of the price cuts. The price cuts as such I gave them. It's 1.8%.
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Fabienne Caron, Kepler Cheuvreux - Analyst [41]
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And it's for food, right?
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [42]
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Yes.
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Fabienne Caron, Kepler Cheuvreux - Analyst [43]
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Okay. Thanks, Antoine.
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Antoine Giscard d'Estaing, Casino Guichard Perrachon SA - CFO [44]
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Thank you. And thank you for attending this call. So our next meeting will be once we publish the first half results, which the analyst presentation will be in the morning of [July 30]. Thank you for your attention, and good evening.
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Operator [45]
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Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.
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