Fnac Darty shares soar on upbeat outlook

Fnac Darty, the newly merged French retail group, said on Wednesday it would hit its cost savings target a year earlier than expected while profits had surged, prompting its shares to jump.

The group, created when Fnac took over Darty in a £900m deal last year, said in its annual results that the integration process has “advanced rapidly” since the takeover began in practical terms at the end of July. As a result it expects to achieve its objective of €130m in cost savings by the end of 2018, a year sooner than its original target.

Shares rose as much as 10.7 per cent to €62.56 on Wednesday morning.

“All indicators are healthy,” said Alexandre Bompard, chairman and chief executive. “These results are all the more satisfying due to the rapid and effective integration of Fnac and Darty, as can be seen in the new objective to deliver the synergies one year ahead of schedule.”

Fnac, which sells magazines, books and electronics, succeeded in its quest for Darty last year after it won a bidding war with French furniture group Conforama for the white-goods retailer.

The deal was seen as an opportunity for Fnac to build scale in order to better compete with the rise of online retailers such as Amazon, as well as for both groups to achieve synergies in areas such as purchasing.

Between them the Fnac Darty network now has 664 stores, of which 459 are in France. Both store networks are already teaming up by allowing reciprocal click and collect services and joint loyalty cards.

The enlarged group said growth last year was good both in France and internationally. Overall revenues rose 1.9 per cent to €7.42bn on a pro forma basis, a measure that incorporates Darty’s results from 2015 to provide a meaningful comparison.

Operating income rose 23 per cent to €203m, also on a pro forma basis. Earnings before interest, tax, debt and amortisation rose 11.8 per cent to €305m.

In France sales increased 2.1 per cent year on year, partly due to increased television sales after more digital channels were rolled out in the country. Revenues in Spain and Portugal fell 0.2 per cent, and Fnac Darty said promotional activity had to remain high in both countries. Revenues in the Benelux region rose 2.4 per cent.

Fnac Darty also signalled a retreat from Brazil, where it has just a handful of stores. “[The group] has initiated an active partner search process that may lead to a disengagement from the country,” it said.