Brazilian retail giant
Companhia Brasileira de Distribuicao
) or Grupo Pão de Açúcar (GPA) has started the year 2014 on a
strong note with double-digit increases in earnings and sales,
despite tough macroeconomic conditions.
In the first quarter, CBD delivered profits of R$338 million
(*$143 million), which increased 22.9% (in local currency) from
the year-ago quarter. The year-over-year increase in profits
reflects sales growth in the period, driven by organic expansion
and lower selling, general and administrative expenses.
Results in Detail
In the first quarter of 2014, consolidated gross sales,
comprising GPA Food and Viavarejo, increased 10.8% year over year
(in local currency) to R$16.597 billion ($7.04 billion), driven
by accelerated organic expansion. Sales beat the Zacks Consensus
Estimate of $6.68 billion. Consolidated net sales climbed 11.9%
during the first quarter.
The company posted same store sales growth of 6.3% in the
reported quarter, driven by same store sales growth of 2.6% in
GPA Food, 54.1% in Viavarejo and 3.6% in Nova Pontocom. The
company opened 21 new stores in the quarter, which fueled
Gross profit increased 6.9% but margin contracted 110 basis
points from the prior-year quarter to 24.9% due to higher share
of Assaí and Nova Pontocom in the sales mix and the ongoing
investments made to boost sales competitiveness in the
Multivarejo operation (which consists of Pão de Açúcar and Extra
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) increased 23.0%, driven by strong
performance at Via Varejo and Nova Pontocom. However, it was
negatively impacted by the Easter effect at GPA Food. Adjusted
EBITDA margin increased 70 basis points to 7.2% in the first
quarter of 2014.
The company operates through the food retail, cash and carry,
electronics and home appliances retail (bricks and mortar),and
e-commerce business segments. These segments are grouped into two
large categories, namely GPA Food, Nova Pontocom and
GPA Food comprises supermarkets, hypermarkets, neighborhood
stores, cash-and-carry stores, gas stations and drugstores while
Viavarejo includes household appliances and e-commerce operations
through Nova Pontocom.
GPA Food's gross sales increased 9.1% in the quarter, with same
store sales growth of 2.6%. This was driven by accelerated growth
across all Food Retail banners, especially Cash and Carry
(Assaí), up 38.2% in the quarter driven by solid same-store sales
growth and store expansions. The company opened 6 Minimercados
Extra, 2 Assaí, 3 Extra Hiper and 2 drugstores, totaling 13
stores in the quarter. Net sales increased 11.4% in the
Sales in this category were driven by extraordinary
performance at Assaí, driven by solid same-store sales growth and
expansion in the store network. In addition, Pão de Açúcar and
Extra banners continued to capture market share in the reported
The category's gross sales surged 54.1%, driven by same store
sales growth of 54.1% on the back of higher customer traffic,
better conversion rates and higher sales owing to the marketplace
business. Increased sales of smartphones and air conditioners and
fans drove sales in the category. Net sales increased 52.6% in
Viavarejo's gross sales increased 6% in the quarter, driven by
same-store sales of 3.6% and 8 new stores openings under the
Casas Bahia banner. Net sales increased 5.8% in the reported
Overall, we are encouraged with the performance of Pão de
Açúcar, which is gearing up to expand its stores and market
share. The company expects to open 400 new food stores by 2016,
which includes 360 new convenience stores in its Mini Mercado
format. The company also has expansion plans for its wholesaler,
Assai, which has been posting solid results in the last few
quarters. The company is expected to open 12 to 15 stores per
year through 2016 under the Assai banner, particularly in the
fast-growing Northeast region. In addition, Pão de Açúcar plans
to open 210 stores by 2016 under the ViaVarejo unit.
Companhia Brasileira de Distribuicao currently holds a Zacks
Rank #2 (Buy).
Other Stocks to Consider
Other stocks worth considering in the retail sector include
Spartan Stores, Inc.
J. C. Penney Company, Inc.
The Kroger Co.
). While Spartan Stores sports a Zacks Rank #1 (Strong Buy), JC
Penny and Kroger carry a Zacks Rank #2.
*1R$=$0.42408 for the quarter ending Mar 31, 2014.
COMPANHIA BRASL (CBD): Free Stock Analysis
PENNEY (JC) INC (JCP): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
SPARTAN STORES (SPTN): Free Stock Analysis
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