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Companhia Brasileira (CBD) Q2 Earnings & Revenues Tumble Y/Y

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Companhia Brasileira de Distribuicao (CBD - Free Report) or Grupo Pao de Acucar delivered soft second-quarter 2021 results, which were negatively impacted by pandemic-led restrictions to contain the new wave of the virus, as well as tough comparisons with the year-ago period’s demand increase that stemmed from the initial stockpiling. Results received partial respite from stringent cost control, as well as constant strength in the digital ecosystem.

In the second quarter of 2021, Companhia Brasileira’s net income from continuing operations amounted to R$4 million ($0.75 million), which declined significantly from R$86 million ($16.2 million) in the year-ago period. The downside can be accountable to lower revenues.

Results in Detail

Gross revenues in the quarter amounted to R$12,985 million ($2,450.4 million). Gross revenues fell 6.5% year over year in local currency. This could be accountable to the effect of limitations associated with the new wave of coronavirus, together with tough comparisons with the year-ago period’s demand surge. Online sales, however, remained sturdy and increased at GPA Brazil and Grupo Exito.

In GPA Brazil, the company has been benefiting from its delivery models, including same-day delivery, Express and Click & Collect; Traditional or next-day delivery; and Last Mile or next-hour delivery — James Delivery and Open Platform. Apart from these, the company is benefiting from its loyalty program, app development efforts, prudent alliances, innovation and data monetization platform. Food e-commerce surged 32% year over year, forming 8.2% of GPA Brazil’s total food sales.

Gross profit fell 4.9% in local currency to R$3,011 million ($568.2 million) and the gross margin expanded 10 basis points (bps) to 25.4%. Adjusted EBITDA fell 7.7% to R$899 million ($169.6 million), with the adjusted EBITDA margin contracting 20 bps to 7.6%.

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Segment Details

GPA Brazil’s gross revenues fell 12.1% in local currency to R$7,062 million ($1,304.9 million). Sales were affected by tough comparisons with the year-ago period that benefited from the initial stockpiling trends; stern measures to contain the new wave of the virus in the quarter under review; closure of 32 stores in 2020 and transfer of non-food product sales to the online channel. This was partly made up by robust online sales (up 32%) and Proximity format expansion. Same-store sales, excluding gas stations and drugstores, rose 4.2% from the second quarter of 2019.

Segment gross margin came in at 25.6%, on the back of efficient commercial dynamics and optimized logistic expenses. SG&A expenses fell 13.4% even in the face of increased inflation. The downside resulted from cost-cutting efforts undertaken in the last 12 months; a major fall in store operation costs and a decline in administrative costs. Adjusted EBITDA margin elevated 60 bps to 8.3%.

The company had acquired 96.57% of Grupo Exito’s capital stock on Nov 27, 2019. Gross revenues in the unit increased 1.3% to R$5,905 million ($1,114.3 million). Elevated share of omnichannel sales and innovative formats in the sales mix were countered by impacts from the pandemic (comparisons with the year-ago period and strict regulations in the quarter under review, including temporary store closures), along with protests in Colombia in May and June. Solid contributions from complementary businesses and real estate growth aided the segment.

Same-store sales excluding gas stations and drugstores increased 7.2% from the second quarter of 2019.

Gross margin expanded 30 bps to 24.9% on solid online sales and recovery of complementary businesses, partly negated by volume declines. SG&A expenses, as a percentage of sales, rose 120 bps to 18.1%. Adjusted EBITDA margin collapsed 90 bps to 7.1%.

Other Details

Companhia Brasileira ended the quarter with cash and marketable securities of R$4,925 million ($990.3 million) and total shareholders’ equity of R$15,401 million ($3,096.7 million). Management undertook capital investments of R$261 million ($49.3 million) during the second quarter.

During the second quarter, the company closed three stores in GPA Brazil. In Grupo Exito, two stores were opened, one was opened by conversion and one was closed. Management ended the quarter with 1,487 stores in total, including 871 GPA Brazil stores and 616 in Grupo Exito.

Shares of this Zacks Rank #4 (Sell) company have declined 7.2% in the past three months against the industry’s growth of 2.8%.

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