Companhia Brasileira de Distribuicao (CBD - Free Report) is likely to continue benefiting from its strong segments, and strategies like digital transformation, among others. These upsides are likely to help this Zacks Rank #2 (Buy) stock deliver an above average performance in the near term. Markedly, Companhia Brasileira’s shares have gained nearly 12% in the past six months compared with the industry’s growth of 18%.
Assai & Digital Transformation Efforts
Companhia Brasileira’s Assai segment, which has long been a major growth driver, delivered a stellar performance in first-quarter 2019. During the quarter, gross sales at this segment rallied 25.6% in local currency, backed by strong performance of stores opened in 2018, enhanced traffic and market share gains. Management’s focus on making constant investments in this segment clearly reflects its robust prospects. The company earlier stated that in 2019, Assai is anticipated to continue with its robust expansion, with same-store sales expected to rise 200 bps above inflation level and total sales to advance more than 20%.
Companhia Brasileira is on track with its digital transformation endeavors. To this end, the company launched James Delivery operations in Sao Paulo during the first quarter and plans to expand to 10 more cities by the end of 2019. Further, the company rolled out its alliance with Cheftime to 28 stores and expects to expand the same to more than 100 stores in the second quarter of 2019. Also, Companhia Brasileira’s My Discount app achieved more than 70% growth in downloads, with solid penetration in loyalty programs. This apart, the company’s alliance with Get Ninjas and other endeavors like Pre-Scanning, Shop & Go and more are noteworthy.
Focus on Pilot Projects & More
The company is focused on its strategy for the 2018-2020 period, which aims at delivering solid food segment performance. The company plans to achieve this by utilizing its multi-network and multi-format existence in order to offer consumers innovative services and products. Further, the company’s core growth plans involve continued organic expansion and stores optimization, enhancing retail format offerings and extending offerings of financial services (particularly at Assai). Moreover, the company targets generating synergies of more than $85 million from Latin America.
These factors along with focus on pilot projects keep Companhia Brasileira well positioned to witness further momentum. Talking of the pilot projects, the company unveiled Compre Bem and Mercado Extra projects for the Extra Super banner to raise penetration in its targeted customer base. Compre Bem project is aims at lowering operating expenses, mainly logistics and IT costs. The Mercado Extra project is aims at reinvigorating the Extra Super banner by strengthening the quality of perishables and customer service.
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