Brazilian retail giant Companhia Brasileira de Distribuicao or Grupo Pão de Açúcar (GPA) reported a decline in profits in the second quarter of 2016 but sales increased from the past year.
In the second quarter, adjusted net income of CBD declined 97.9% (in local currency) from the prior-year quarter owing to a deterioration of the economic scenario during the year, which resulted in lower demand and consumer confidence.
Adjusted net income margin was also down 80 basis points (bps) from the year-ago quarter.
Results in Detail
CBD posted improved second quarter 2016 sales, despite a weak economic environment and restricted spending.
In the second quarter of 2016, consolidated gross sales grew 4.7% year over year (in local currency) and compared favorably with preceding quarter’s growth of 4.4%.
Net sales of this retailer increased 3.5% year over year, which compared favorably with sales growth of 3% in the preceding quarter. Net sales were up 4.9% after adjusting for the calendar effect. Assai and Multivarejo continued to deliver stronger sales, while Via Varejo improved, and witnessed market share gains.
Comparable store sales grew 3.2% in the second quarter as against 0.4% decline in the preceding quarter.
Pao de Acucar opened 9 stores in the quarter, including 7 in the food segment (5 Minuto Pão de Açúcar, 1 Assaí and 1 Pão de Açúcar), 1 Casas Bahia and 1 Ponto Frio. A total of 59 stores were opened in the last 12 months. For 2016, the company plans to continue to focus on higher-return formats (Assai and Proximity).
Gross profit grew 9.8% in the quarter as against a decline of 6.3% in the preceding quarter. Gross margin expanded 140 bps to 25.4% due to the business mix effect and recognition of tax credits.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) decreased just 1%. Adjusted EBITDA margin declined 20 bps to 4.6% in the second quarter. Adjusted EBITDA had declined 52.4% in the preceding quarter.
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 Food Business (Multivarejo and Assai) and Non-Food Business (Viavarejo and Cnova).
Food Business
Food Business’ net sales increased 11.3% (adjusting for calendar effect) in the quarter, which compared favorably with preceding quarter’s growth of 10.9%.
Despite the economic slowdown, same-store sales, adjusted for the calendar effect, in the Food category grew 7.1%. The sales growth was driven by solid performance of Assai stores and improved sales volume at Multivarejo. It was significantly higher than 3.1% growth in the preceding quarter.
Non-Food Business
Net sales of the Non-Food Business decreased 3% in the quarter. However, the decline was narrower than the preceding quarter’s decline of 5.5%.
Cnova: Category net sales decreased 7.9% in the quarter.
Viavarejo: Viavarejo’s net sales grew just 0.3% in the quarter as a result of store closures in the second half of 2015 and the first quarter of 2016. We note that sales had declined 12.7% in the preceding quarter. The company witnessed sequential improvement in same-store sales trend. Same same-store sales grew 2.6% as against a decline of 11.8% in the preceding quarter, supported by banner conversions and solid sales of services in the period.
Companhia Brasileira de Distribuicao has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks worth considering in the broader retail sector include Wal-Mart Stores, Inc. (WMT - Free Report) , Big Lots, Inc. (BIG - Free Report) and Dollar Tree Inc. (DLTR - Free Report) . All of these hold a Zacks Rank #2 (Buy).
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Brazilian retail giant Companhia Brasileira de Distribuicao or Grupo Pão de Açúcar (GPA) reported a decline in profits in the second quarter of 2016 but sales increased from the past year.
In the second quarter, adjusted net income of CBD declined 97.9% (in local currency) from the prior-year quarter owing to a deterioration of the economic scenario during the year, which resulted in lower demand and consumer confidence.
Adjusted net income margin was also down 80 basis points (bps) from the year-ago quarter.
Results in Detail
CBD posted improved second quarter 2016 sales, despite a weak economic environment and restricted spending.
In the second quarter of 2016, consolidated gross sales grew 4.7% year over year (in local currency) and compared favorably with preceding quarter’s growth of 4.4%.
Net sales of this retailer increased 3.5% year over year, which compared favorably with sales growth of 3% in the preceding quarter. Net sales were up 4.9% after adjusting for the calendar effect. Assai and Multivarejo continued to deliver stronger sales, while Via Varejo improved, and witnessed market share gains.
Comparable store sales grew 3.2% in the second quarter as against 0.4% decline in the preceding quarter.
Pao de Acucar opened 9 stores in the quarter, including 7 in the food segment (5 Minuto Pão de Açúcar, 1 Assaí and 1 Pão de Açúcar), 1 Casas Bahia and 1 Ponto Frio. A total of 59 stores were opened in the last 12 months. For 2016, the company plans to continue to focus on higher-return formats (Assai and Proximity).
Gross profit grew 9.8% in the quarter as against a decline of 6.3% in the preceding quarter. Gross margin expanded 140 bps to 25.4% due to the business mix effect and recognition of tax credits.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) decreased just 1%. Adjusted EBITDA margin declined 20 bps to 4.6% in the second quarter. Adjusted EBITDA had declined 52.4% in the preceding quarter.
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 Food Business (Multivarejo and Assai) and Non-Food Business (Viavarejo and Cnova).
Food Business
Food Business’ net sales increased 11.3% (adjusting for calendar effect) in the quarter, which compared favorably with preceding quarter’s growth of 10.9%.
Despite the economic slowdown, same-store sales, adjusted for the calendar effect, in the Food category grew 7.1%. The sales growth was driven by solid performance of Assai stores and improved sales volume at Multivarejo. It was significantly higher than 3.1% growth in the preceding quarter.
Non-Food Business
Net sales of the Non-Food Business decreased 3% in the quarter. However, the decline was narrower than the preceding quarter’s decline of 5.5%.
Cnova: Category net sales decreased 7.9% in the quarter.
Viavarejo: Viavarejo’s net sales grew just 0.3% in the quarter as a result of store closures in the second half of 2015 and the first quarter of 2016. We note that sales had declined 12.7% in the preceding quarter. The company witnessed sequential improvement in same-store sales trend. Same same-store sales grew 2.6% as against a decline of 11.8% in the preceding quarter, supported by banner conversions and solid sales of services in the period.
Companhia Brasileira de Distribuicao has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks worth considering in the broader retail sector include Wal-Mart Stores, Inc. (WMT - Free Report) , Big Lots, Inc. (BIG - Free Report) and Dollar Tree Inc. (DLTR - Free Report) . All of these hold 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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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