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CBD Posts Strong 3Q Results

Zacks Equity Research

Companhia Brasileira de Distribuicao (CBD) reported third quarter 2012 earnings per share of 69 cents compared with 31 cents in the third quarter of 2011.

The increase reflected the continuing operational improvements in the two business segments, namely GPA Food and Viavarejo.

Quarter in Detail

In the third quarter of 2012, consolidated gross sales, comprising GPA Food and Viavarejo, increased 8.7% (in local currency) driven by same store sales growth owing to improved product mix and addition of new stores. Consolidated net sales climbed 9.7% during the quarter.

Though gross profit climbed 3.9%, gross margin contracted 140 basis points to 26.4% from the prior-year quarter, pressured by increased logistics costs in the electronic segment.

EBITDA (Earnings Before Interest Tax and Depreciation) increased 11.1%, while EBITDA margin expanded 10 basis points year on year to 6.6%, driven by operational improvement at GPA Food.

Segment Details

GPA Food’s gross sales increased 9.5% in the quarter, driven by 6.8% growth in gross same store sales. The 15 new stores added in the quarter also boosted sales of the segment. Net sales in the segment climbed 9.8% year over year.

Viavarejo’s gross sales increased 7.8% in the quarter, driven by 7.5% growth in gross same store sales. Net sales in the segment climbed 9.5% year over year.


We are optimistic about the company’s position in the retail sector. CBD is a leading player in the global food retail sector based on both gross sales and number of stores.

However, it also faces intense competition from its rivals such as Wal-Mart Stores, Inc. (WMT) and Carrefour SA as well as from local and regional players in respective countries.

Currently, we have a Neutral recommendation on CBD. The stock carries a Zacks #3 Rank (a short-term Hold rating).

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