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Companhia Brasileira Q3 Sales Up on Assai Despite Deflation
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Companhia Brasileira de Distribuicao‘s third-quarter 2017 sales were driven by solid growth at Assai and at the Extra banner. Both Multivarejo and Assai continued to gain market share in the quarter. The company is scheduled to announce its third-quarter earnings results on Oct 26, after the market closes.
Results in Detail
In the third quarter, net sales, adjusted for calendar effect increased 8.1% year over year, despite sharp deflation. The improvement was backed by the continued recovery in Extra Hiper markets and consistent growth at Assai driven by customer traffic. However, the growth was lower than the preceding quarter’s improvement of 9% in the second quarter and 9.5% year over year in the first quarter. Comparable store sales (comps) grew 3.3% in the reported quarter, where Multivarejo inched up 0.6% (compared to 1.2% in the preceding quarter) and Assai increased 7.7% (lower than 13.5% growth in the second quarter).
During the third quarter, the company opened seven stores, of which three were in the Minuto Pao de Acucar format, one Assai, one Pao de Acucar and two drugstores. The company also converted four Extra Hiper stores to Assai during the quarter, bringing the total number of conversions delivered to seven in the year. By the end of 2017, the company expects to complete nine store conversions.
If we look into the share price movement of Companhia Brasileira, we note that the stock has rallied 46.5% year to date, outperforming the industry’s growth of 15%. The broader Retail-Wholesale sector, on the other hand, grew 19.6% in the said time frame.
Segment Details
GPA’s brick-and-mortar stores and e-commerce operations are divided into three business units:
Multivarejo operates in the supermarket, hypermarket and Minimercado store formats as well as fuel stations and drugstores under the Pao de Acucar and Extra banners.
This segment’s net sales declined 2.1% in the third quarter. However, comps inched up 0.6%, owing to market share gains, improvement in the trend of sales volume and customer traffic. Accelerated growth of Extra Hiper, driven by the sequential improvement of non-food categories led to improved performance in the quarter, despite food deflation. The “My Discount” program, “Collect & Win” promotion, assortment review and launch of iconic products aided Pao de Acucar banner.
Assai operates in the cash-and-carry wholesale segment. GPA Malls is responsible for managing the Group's real estate assets, expansion projects and new store openings.
Net sales increased 25.2% in the third quarter, driven by new store opening and comp sales growth. Comps grew 7.7%, with strong customer traffic expansion and increase in sales volume, offsetting the effect of food deflation. Inflation levels declined from 16.3% last year to - 4.5% in the reported quarter.
Via Varejo’s operations have discontinued and its bricks and mortar electronics and home appliances stores have come under the Casas Bahia and Pontofrio banners. It falls under the e-commerce segment.
2017 Outlook
Keeping in view the strong third-quarter results, GPA expects to reiterate its focus on higher-return formats, such as Assai and Multivarejo. The company also expects to renovate stores and focus on conversions of Extra Hiper stores into Assai to strengthen its portfolio.
Zacks Rank & Other Stocks to Consider
Companhia Brasileira currently carries a Zacks Rank #2 (Buy).
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Companhia Brasileira Q3 Sales Up on Assai Despite Deflation
Companhia Brasileira de Distribuicao‘s third-quarter 2017 sales were driven by solid growth at Assai and at the Extra banner. Both Multivarejo and Assai continued to gain market share in the quarter. The company is scheduled to announce its third-quarter earnings results on Oct 26, after the market closes.
Results in Detail
In the third quarter, net sales, adjusted for calendar effect increased 8.1% year over year, despite sharp deflation. The improvement was backed by the continued recovery in Extra Hiper markets and consistent growth at Assai driven by customer traffic. However, the growth was lower than the preceding quarter’s improvement of 9% in the second quarter and 9.5% year over year in the first quarter. Comparable store sales (comps) grew 3.3% in the reported quarter, where Multivarejo inched up 0.6% (compared to 1.2% in the preceding quarter) and Assai increased 7.7% (lower than 13.5% growth in the second quarter).
During the third quarter, the company opened seven stores, of which three were in the Minuto Pao de Acucar format, one Assai, one Pao de Acucar and two drugstores. The company also converted four Extra Hiper stores to Assai during the quarter, bringing the total number of conversions delivered to seven in the year. By the end of 2017, the company expects to complete nine store conversions.
If we look into the share price movement of Companhia Brasileira, we note that the stock has rallied 46.5% year to date, outperforming the industry’s growth of 15%. The broader Retail-Wholesale sector, on the other hand, grew 19.6% in the said time frame.
Segment Details
GPA’s brick-and-mortar stores and e-commerce operations are divided into three business units:
Multivarejo operates in the supermarket, hypermarket and Minimercado store formats as well as fuel stations and drugstores under the Pao de Acucar and Extra banners.
This segment’s net sales declined 2.1% in the third quarter. However, comps inched up 0.6%, owing to market share gains, improvement in the trend of sales volume and customer traffic. Accelerated growth of Extra Hiper, driven by the sequential improvement of non-food categories led to improved performance in the quarter, despite food deflation. The “My Discount” program, “Collect & Win” promotion, assortment review and launch of iconic products aided Pao de Acucar banner.
Assai operates in the cash-and-carry wholesale segment. GPA Malls is responsible for managing the Group's real estate assets, expansion projects and new store openings.
Net sales increased 25.2% in the third quarter, driven by new store opening and comp sales growth. Comps grew 7.7%, with strong customer traffic expansion and increase in sales volume, offsetting the effect of food deflation. Inflation levels declined from 16.3% last year to - 4.5% in the reported quarter.
Via Varejo’s operations have discontinued and its bricks and mortar electronics and home appliances stores have come under the Casas Bahia and Pontofrio banners. It falls under the e-commerce segment.
2017 Outlook
Keeping in view the strong third-quarter results, GPA expects to reiterate its focus on higher-return formats, such as Assai and Multivarejo. The company also expects to renovate stores and focus on conversions of Extra Hiper stores into Assai to strengthen its portfolio.
Zacks Rank & Other Stocks to Consider
Companhia Brasileira currently carries a Zacks Rank #2 (Buy).
Investors interested in the broader retail space may also consider Boot Barn Holdings, Inc. (BOOT - Free Report) , Abercrombie & Fitch Company (ANF - Free Report) and DSW Inc. . All three stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While Boot Barn has long-term earnings growth of 15%, Abercrombie & Fitch and DSW have long-term growth rates of 14% and 6.3%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>