UPDATE 2-Casino Q3 sales slow on weak demand in France, company prepares for new lockdown

* Q3 Sales 7.4 bln euros, up 6.2% on same store basis

* Q3 French same-store sales down 0.2%

* Eyes gross debt reduction of 1 billion euros at end-2020 (Adds CFO coments from call)

PARIS, Oct 29 (Reuters) - French retailer Casino said sales growth slowed in the third quarter, as a weaker performance in France held back robust growth in Brazil, the group’s second-largest market.

In France, lower tourist numbers in Paris and the southeast of the country in July due to the pandemic weighed on the performance of Monoprix and Franprix and also on the Geant hypermarkets.

Sales momentum started to improve in August, and there was a clear upturn in sales at Monoprix in October and at Franprix in recent weeks, Finance Chief David Lubek told analysts.

Casino was now preparing for a new national lockdown to curb COVID-19 that was due to start at midnight in France.

“It is likely that the new shift from eating out to eating in will reinforce store sales, particularly in proximity as well as in e-commerce. We know from our experience in Q1 and Q2 that the impact may be quite significant,” Lubek said.

“Our teams are ready to face the challenge with supply chains prepared for a possible surge in volumes,” he added.

Food retailers across the world have benefited from a surge in demand as more consumers eat at home due to the pandemic and government enforced-lockdowns.

This had strongly benefited Casino’s convenience stores in city centers and e-commerce during the second quarter.

Sales totalled 7.426 billion euros in the third quarter.

On a same-store basis and excluding fuel and calendar effects, group sales rose 6.2% in the period, compared to 10.4% growth in the second quarter.

In France, total sales for the third quarter came to 3.676 billion euros, a decline of 0.2% on a same-store basis.

Profitability in France however improved with Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) rising by 46 million euros over the quarter, driven by cost savings that should continue in the fourth quarter.

Meanwhile costs for coronavirus-related measures fell sharply from the first half to 3 million euros in the third quarter, a level that should be maintained in the fourth quarter.

Casino - which has been selling assets to reduce debt and which also controls Brazil’s Grupo Pao de Acucar - said it expected to lower its gross debt by 1 billion euros ($1.18 billion) to 5.9 billion at the end of 2020.

The group has so far sold 2.8 billion euros of assets, including several hundred discount Leader Price stores for 735 million euros to German rival Aldi, and has said it was working on more disposals to reach its 4.5 billion euro target. ($1 = 0.8461 euros) (Reporting by Dominique Vidalon; Editing by Susan Fenton, Kirsten Donovan and Cynthia Osterman)