Markets

Companhia Brasileira Hits 52-Week Low on Inventory Issues

A generic image of a person on their laptop
Credit: Shutterstock photo

Shares of Companhia Brasileira de DistribuicaoCBD dropped to a 52-week low of $10.15 on Dec 21 after the company initiated a legal review of issues related to inventory management. Share price of this Brazilian retailer eventually closed at $10.44 on Dec 21.

Inventory Issues

On Dec 18, CBD's subsidiary Cnova announced that it has involved its legal advisors and accountants to investigate issues of employee misconduct related to inventory management. The issues primarily relate to the handling of product returns and damaged product inventory at distribution centers of the company's Brazilian subsidiary, Cnova Comércio Eletrônico S.A. (Cnova Brazil).

The review process will also assess if there would be any accounting or financial impact, though it is too early to predict when the investigation will be complete.

Overall, Companhia Brasileira de Distribuicao has been reporting year-over-year decline in profits since the past three quarters of 2015, reflecting a rise in expenses and thereby margin contraction. A difficult macro-economic environment in Brazil also led to soft results. Net sales increased in the period, only due to new store openings. CBD's comp sales growth was significantly impacted due to same store decline in Viavarejo.

Nevertheless, the company is impressed with the performance of the food segment, which has been growing despite declining consumer spending environment, owing to renovation of Extra stores and continued growth from Assai stores. Going ahead, the company has expansion plans for both Extra banners and Assai.

Companhia Brasileira de Distribuicao has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the industry include Wal-Mart Stores, Inc. WMT , Ross Stores, Inc. ROST and The Kroger Co. KR . All of them carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

WAL-MART STORES (WMT): Free Stock Analysis Report

KROGER CO (KR): Free Stock Analysis Report

ROSS STORES (ROST): Free Stock Analysis Report

COMPANHIA BRASL (CBD): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ROST WMT KR CBD

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More