Companhia Brasileira de Distribuicao
) reported first quarter 2013 earnings of R$ 0.90 (45 cents per
share) compared with R$0.64 per share (36 cents per share) in the
year-ago quarter. The increase reflected sales growth, efficient
control of expenses and reduction in financial expenses despite
slow wage growth and eroding consumer confidence.
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 large
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 first quarter of 2013, consolidated gross sales,
comprising GPA Food and Viavarejo, increased 9.7% year over year
(in local currency) driven by improved food retail performance.
The electronics and home appliance brick-and-mortar stores, led
by Pontofrio, drove same-store sales growth of 6.6%. Consolidated
net sales climbed 10.2% during the quarter.
The company opened 25 new stores in the quarter which fueled
growth. For 2013, the company plans to open more than 150 stores,
targeting northeast and mid-west regions.
Though gross profit climbed 8.9%, gross margin contracted 30
basis points to 26.4% from the prior-year quarter, pressured by
increased competition in cash-and-carry stores.
Earnings before interest, tax, depreciation and amortization
(EBITDA) increased 11.2% benefiting from lower operating expenses
at Viavarejo. EBITDA margin remained flat at 6.4% in the first
quarter of 2013.
GPA Food's gross sales increased 10.6% in the quarter, driven
by 6.4% growth in gross same store sales. The growth in same
store sales was driven by both retail and cash and carry sales
growth. The 19 new stores added in the quarter also boosted
segment sales. Net sales increased 10.9% in the
Viavarejo's gross sales increased 8.7% in the quarter, driven
by growth in gross same store sales. Net sales increased 9.3% in
The company launched 'Extra Marketplace' - the first online
shopping mall in Brazil in early Mar 2013. It will be operated
through the Extra.com.br website. This initiative has increased
the number of products in the e-commerce platform from 120,000
items in March to 200,000 items in April. CBD expects to reach
600,000 items by Dec 2013, which indicates the growth potential
of the platform.
We are impressed with CBD's strong market position and
economies of scale that have helped the company deliver strong
results despite continued weakness in consumer expenditure. The
company's cost savings in its Viavarejo appliance and home
furnishings unit has also remained encouraging.
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. Currency translation headwinds and tough employment
conditions, particularly in Europe remain a threat. We expect
slow recovery in the U.S. and therefore consumer sentiment will
recover at a mild pace.
CBD holds a Zacks Rank #3 (Hold). Other retail companies that
warrant a look are
Green Mountain Coffee Roasters, Inc
). While Kroger and Green Mountain hold a Zacks Rank #1 (Strong
Buy), Safeway holds a Zacks Rank #2 (Buy).
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