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Will Assai Continue to Drive Growth at Companhia Brasileira?
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Companhia Brasileira de Distribuicao (CBD - Free Report) has seen its shares rally 50.4% over a year, in comparison with the industry’s surge of 32.4%. While the company has been gaining from continued market share gains at its Assai and Multivarejo segments, we believe that Assai remains its major growth driver. So, let’s delve deeper into these factors and see if they can continue to drive Companhia Brasileira amid a tough Brazilian environment.
Assai: A Major Growth Driver
Companhia Brasileira’s Assai segment, which has long been the company’s major growth driver, remained the highlight of its third-quarter 2017 performance as well. Notably this quarter marked Assai’s strongest quarter of combined volume and traffic growth in the recent times. In the third quarter, sales at this segment surged 25.2%, adjusted for the calendar effect. The sturdy growth was driven by higher comps and contributions from new stores.
Despite major food deflation in some key categories, Assai’s comps grew 7.7%, on the back of improved customer traffic and sales volume. Further, Assai contributed about 43% to the company’s total food sales, marking 600 bps growth from the year-ago period. Also, the segment witnessed market share gains of 330 bps year over year. Notably, management remains committed toward converting Extra Hiper stores into Assai stores, to optimize its portfolio. This clearly reflects robust prospects from this segment.
Apart from Assai, the company has also been gaining from improved volumes of Pao de Acucar and consistent recovery at Extra Hiper, which have been driving its Multivarejo segment. Evidently, the company’s third-quarter sales jumped 8.1% (adjusted for calendar effect), with comps rising at both segments. Also, adjusted EBITDA jumped 11.4%, with the EBITDA margin expanding 20 bps to 5%, fueled by improvements at both Multivarejo and Assai. For 2017 too, management envisions Food segment EBITDA margin of approximately 5.5%, backed by greater profitability at both divisions.
Further, the company remains focused on enhancing its food business, by making investments in Assai and Pao de Acucar, which are yielding solid returns. All said, the company anticipates continued market share gains at both its segments.
While macroeconomic headwinds in the Brazilian retail space and stiff competition in the appliances business may act as deterrents, we believe that strength in Assai is likely to help this Zacks Rank #3 (Hold) stock sustain its momentum.
Dollar General Corporation (DG - Free Report) carrying a Zacks Rank #2 has an impressive long-term earnings growth rate of 11.3%.
Ross Stores, Inc. (ROST - Free Report) delivered an average positive earnings surprise of 5.5% in the trailing four quarters and has a long-term earnings growth rate of 10%. The company carries the same Zacks Rank as Dollar General.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Will Assai Continue to Drive Growth at Companhia Brasileira?
Companhia Brasileira de Distribuicao (CBD - Free Report) has seen its shares rally 50.4% over a year, in comparison with the industry’s surge of 32.4%. While the company has been gaining from continued market share gains at its Assai and Multivarejo segments, we believe that Assai remains its major growth driver. So, let’s delve deeper into these factors and see if they can continue to drive Companhia Brasileira amid a tough Brazilian environment.
Assai: A Major Growth Driver
Companhia Brasileira’s Assai segment, which has long been the company’s major growth driver, remained the highlight of its third-quarter 2017 performance as well. Notably this quarter marked Assai’s strongest quarter of combined volume and traffic growth in the recent times. In the third quarter, sales at this segment surged 25.2%, adjusted for the calendar effect. The sturdy growth was driven by higher comps and contributions from new stores.
Despite major food deflation in some key categories, Assai’s comps grew 7.7%, on the back of improved customer traffic and sales volume. Further, Assai contributed about 43% to the company’s total food sales, marking 600 bps growth from the year-ago period. Also, the segment witnessed market share gains of 330 bps year over year. Notably, management remains committed toward converting Extra Hiper stores into Assai stores, to optimize its portfolio. This clearly reflects robust prospects from this segment.
Apart from Assai, the company has also been gaining from improved volumes of Pao de Acucar and consistent recovery at Extra Hiper, which have been driving its Multivarejo segment. Evidently, the company’s third-quarter sales jumped 8.1% (adjusted for calendar effect), with comps rising at both segments. Also, adjusted EBITDA jumped 11.4%, with the EBITDA margin expanding 20 bps to 5%, fueled by improvements at both Multivarejo and Assai. For 2017 too, management envisions Food segment EBITDA margin of approximately 5.5%, backed by greater profitability at both divisions.
Further, the company remains focused on enhancing its food business, by making investments in Assai and Pao de Acucar, which are yielding solid returns. All said, the company anticipates continued market share gains at both its segments.
While macroeconomic headwinds in the Brazilian retail space and stiff competition in the appliances business may act as deterrents, we believe that strength in Assai is likely to help this Zacks Rank #3 (Hold) stock sustain its momentum.
Looking for More Promising Stocks? Check These
Wal-Mart Stores Inc. (WMT - Free Report) , with a Zacks Rank #2 (Buy) flaunts a splendid earnings surprise history. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General Corporation (DG - Free Report) carrying a Zacks Rank #2 has an impressive long-term earnings growth rate of 11.3%.
Ross Stores, Inc. (ROST - Free Report) delivered an average positive earnings surprise of 5.5% in the trailing four quarters and has a long-term earnings growth rate of 10%. The company carries the same Zacks Rank as Dollar General.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>