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Companhia Brasileira (CBD) Q1 Earnings & Revenues Increase Y/Y

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Companhia Brasileira de Distribuicao CBD or Grupo Pao de Acucar delivered solid first-quarter 2021 results, backed by robust online performance, as well as strength in GPA Brazil and Grupo Exito.

The company saw considerable growth in EBITDA as well as income on the back of its efforts to curtail SG&A expenses, along with portfolio changes and evolvement of digital efforts across all nations it operates in. However, the quarter continued to see tough pandemic-induced limitations.

In the first quarter of 2021, Companhia Brasileira’s net income from continuing operations amounted to R$113 million ($20.7 million), which increased significantly from a net loss of R$246 million ($45 million) in the year-ago period. The upside was backed by solid increases in revenues and adjusted EBITDA.

Results in Detail

Gross revenues in the quarter amounted to R$13,722 million ($2,509.6 million). Gross revenues rose 4.8% year over year in local currency, backed by robust online sales and remodel or conversion of physical stores. The company saw strength in GPA Brazil as well as Grupo Exito. Notably, food e-commerce remained a major driver, rising 137% in the first quarter. E-commerce sales surged 142% in the quarter, with online penetration more than doubling to 8.2% (on a consolidated basis) from 3.7%.

Certainly, 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. Moreover, the company’s loyalty program and app development efforts have been yielding results. On the digital front, the company remains focused on expanding via its platform, as well as building on its alliances.

Gross profit rose 10.3% in local currency to R$3,245 million ($593.5 million) and the gross margin expanded 130 basis points (bps) to 26.1%. Adjusted EBITDA increased 36% to R$935 million ($171 million), with the adjusted EBITDA margin growing 170 bps to 7.5%. Adjusted EBITDA was backed by commercial efficacy and solid SG&A control at GPA Brazil, among other factors.

Segment Details

GPA Brazil’s gross revenues dipped 2.8% in local currency to R$7,135 million ($1,304.9 million). Sales were affected by macroeconomic hurdles amid the pandemic, including tough year-over-year comparisons with March 2020 that benefited from the initial stockpiling trends, stern local government regulations, discontinuation of emergency aid payments and adverse calendar effect, among other factors. This was partly made up by robust online sales, solid growth at Proximity formats and the evolution of converted supermarket formats. Same-store sales, excluding gas stations and drugstores, advanced 7.6%.

Segment gross margin increased 70 bps to 25.8%, on the back of efficient commercial dynamics and optimized logistic expenses. SG&A expenses dropped 50 basis points (as a percentage of sales) to 18.3% on solid cost control. Adjusted EBITDA margin elevated 100 bps to 8.2%.

The company had acquired 96.57% of Grupo Exito’s capital stock on Nov 27, 2019. Gross revenues in the unit increased 14.4% to R$6,571 million ($1,201.8 million), reflecting favorable currency movements. Same-store sales, excluding gas stations, were down 2.7%. Excluding the impact of COVID-19, same-store sales, excluding gas stations, rose 4.5%. The segment benefited from digital strength, including solid online sales, alliances with last-mile carriers and robust loyalty programs.

Gross margin expanded 180 bps to 26.2%. SG&A expenses, as a percentage of sales, rose 30 bps to 18.8%. Adjusted EBITDA margin increased 250 bps to 8.2%.

Other Details

Companhia Brasileira ended the quarter with cash and marketable securities of R$3,891 million ($680 million) and total shareholders’ equity of R$17,183 million ($3,003 million).

During the first quarter, the company converted four Extra Super stores into Mercado Extra, opened one Minuto Pao de Acucar store and converted one Exito Wow store in Colombia. Management plans to open more than 150 new Pao and Minuto stores countrywide over the next three years.

GPA Brazil and Grupo Exito are focused on strategic goals for 2021. To this end, the company’s segments are committed to lifting the digital platform across all countries they operate in. Further, the strategic priorities include organic growth of Pao de Acucar and Minuto Pao de Acucar formats in Brazil, restructuring the hypermarket model, rollout and maturation of new supermarket concepts and deleverage at the consolidated company.

Shares of this Zacks Rank #3 (Hold) company have declined 33.2% in the past year against the industry’s growth of 14.9%.

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