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Analyst Blog

After an improved sales performance in the first half of the year, Companhia Brasileira de Distribuicao (CBD - Free Report) , also known as Grupo Pão de Açúcar (GPA) recently posted weak third-quarter sales results.

Net sales of this retailer increased 4.4% in third-quarter 2016, driven by comparable store sales growth. Net sales growth, however, compared unfavorably with sales growth of 5% in the preceding quarter due to a weak economic environment in Brazil and restricted spending. Comparable store sales grew 1.9% in the third quarter compared with 3.2% growth in the previous quarter.

Assai Multivarejo continued to deliver stronger sales alongside witnessing a better sales trend at Multivarejo, supported by acceleration in sales recovery at Via Varejo.

Pao de Acucar opened 4 stores in the third quarter (3 Assaí and 1 Casas Bahia), bringing the total store openings in the last 12 months to 40 stores. Currently 15 stores are under construction: 9 Assaí stores, including 2 conversions of Extra Hiper, 1 Pão de Açúcar and 5 Minuto Pão de Açúcar stores. For 2016, the company plans to continue focusing on higher-return formats (Assai and Proximity).

COMPANHIA BRASL Price and Consensus

 

COMPANHIA BRASL Price and Consensus | COMPANHIA BRASL Quote

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 14.0% in the quarter, up from the preceding quarter’s growth of 11.3%.

Despite the economic slowdown, same-store sales in the Food category grew 8.9%. Sales growth was driven by solid performance of Assai stores and improved sales volume performance at Multivarejo. It was higher than 7.1% growth in the preceding quarter.

Non-Food Business

Net sales of the Non-Food Business decreased significantly by 10.1% in the quarter. The decline was wider than the preceding quarter’s decline of 2.8%.

Cnova: Category net sales fell 38.3% in the quarter, much wider than the preceding quarter’s decline of 7.6%.

Viavarejo: Viavarejo’s net sales grew just 0.4% in the quarter, still bearing the brunt of store closures in the second half of 2015 and the first quarter of 2016. However, it improved from 0.3% growth in the preceding quarter.

Same same-store sales grew 1.8% compared with 2.6% growth in the preceding quarter, due to a challenging macroeconomic scenario, and a still sluggish electronics and home appliances market.

Zacks Rank

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

Some well-positioned retailers include The Children's Place, Inc. (PLCE - Free Report) , Urban Outfitters Inc. (URBN - Free Report) and Tilly's, Inc. (TLYS - Free Report) . All these sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children’s Place has an average positive earnings surprise of 33.06% in the trailing four quarters. It also has a long-term earnings growth rate of 10.33%.

While Urban Outfitters has a long-term earnings growth rate of 15.00%, Tilly’s has a growth rate of 15.50%.

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