Companhia Brasileira de Distribuicao
) reported fourth quarter 2012 adjusted earnings growth of 15.2%
(in local currency), while earnings increased 32.1% (in local
currency) in the year 2012.
The increase reflected sales growth, expense control over the
electronics operations and reduction in financial expenses. The
continuing operational improvements in the four business segments
of food retail, cash and carry, electronics and home appliances
retail (bricks and mortar) and e-commerce also added to growth.
These segments are further grouped into two categories, namely
GPA Food and Viavarejo.
GPA Food comprises supermarkets, hypermarkets, neighborhood
stores, cash-and-carry stores, gas stations and drugstores.
Viavarejo includes household appliances and e-commerce operations
through Nova Pontocom.
Quarter in Detail
In the fourth quarter of 2012, consolidated gross sales
(excluding real estate projects), comprising GPA Food and
Viavarejo, increased 8.0% (in local currency) driven by improved
food retail performance, and double-digit growth in same-store
sales, partially offset by the slowdown in e-commerce business
growth trend due to the fierce competition in the sector.
Consolidated net sales climbed 8.7% during the quarter.
Consolidated gross sales increased 8.4% in the year 2012, while
net sales increased 9.0%.
The company launched two new websites under Nova Pontocom in
the quarter. The barateiro.com.br website will sell refurbished
or minor-damaged products, while the Patiu Viagens website will
book tickets, packages and other travel-related services.
Though gross profit (excluding real estate projects) climbed
8.3%, gross margin contracted 10 basis points to 27.9% from the
prior-year quarter, pressured by increased competition and higher
logistics costs in the electronic segment.
Earnings before Interest, Tax, Depreciation and Amortization
(EBITDA) increased 28.0%, while EBITDA margin expanded 130 basis
points year on year to 8.7%, driven by operational improvement at
Viavarejo and improvement in food margin.
GPA Food's gross sales increased 9.0% in the quarter, driven
by 5.6% growth in gross same store sales. The growth in same
store sales was driven by increase in food sales, particularly in
perishables and beverages categories. The 35 new stores added in
the quarter also boosted sales of the segment.
Viavarejo's gross sales increased 6.9% in the quarter, driven
by 6.0% growth in gross same store sales.
Other Financial Update
During December, CBD announced its plan to open 100 new
Minimercado Extra stores by 2013 to expand its supermarket
The company has been focusing on its food business, instead of
other categories of appliances and electronics, as consumers find
it difficult to purchase these items in the current economic
scenario. Further, the company is targeting northeast and
mid-west regions for expansion. In addition, the company plans to
open more than 150 stores in 2013.
However, the retail sector has experienced economic slowdown
in 2012 that has led to a decline in consumer spending. The
continued weakness in consumer expenditure may impact the
company's home appliances sector. Currency translation headwinds
and tough employment conditions, particularly in Europe also
remain a threat. We expect slow recovery in the U.S. and expect
consumer sentiment to recover at a mild pace.
CBD holds a Zacks Rank #3 (Hold). Retail and wholesale stocks
that are presently doing favorable business include
Dollar Tree Inc
Ross Stores Inc
TJX Companies Inc.
), all of which carry a Zacks Rank #2 (Buy).
PAO ACUCAR-GDR (CBD): Free Stock Analysis
DOLLAR TREE INC (DLTR): Free Stock Analysis
ROSS STORES (ROST): Free Stock Analysis
TJX COS INC NEW (TJX): Free Stock Analysis
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