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Companhia Brasileira de Distribuicao (CBD) Q1 Sales Sluggish

Zacks Equity Research

Companhia Brasileira de Distribuicao CBD, also known as Grupo Pao de Acucar reported sales growth in the first quarter of 2017.

In the financial statements of CBD as of Dec 31, 2016, operations of Via Varejo will be considered to be nonfunctional. The move comes after the divesture of the interest held by GPA in Via Varejo S.A. as announced in the material fact notice of Nov 23, 2016.

In the first quarter, net sales, adjusted for calendar effect increased 9.5%, lower than the preceding quarter’s growth of 12.1% year over year. The improvement was backed by the recovery in Extra Hiper markets and consistent growth at Assai. Comparable store sales (comps) rose 5.6% in the first quarter, which was lower than 7.7% growth in the fourth quarter of 2016.

Companhia Brasileira de Distribuicao Price, Consensus and EPS Surprise

 

Companhia Brasileira de Distribuicao Price, Consensus and EPS Surprise | Companhia Brasileira de Distribuicao Quote

Segment Details

GPA’s brick-and-mortar stores and e-commerce operations are divided into three business units:

Multivarejo operates 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 inched up 0.4% in the first quarter, with comps same-store sales growing 2.0%. Recovery in volumes and higher customer traffic led to improved performance in the quarter.

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 soared 28.8% in the first quarter, driven by comp sales. Comps grew 12.9% due to the continued double-digit growth in customer traffic and store conversion, despite inflation in the food category. In the past 12 months, Assai expanded 10 stores and converted two Extra Hiper stores, which contributed approximately R$600 million to net sales in the said period.

In the first quarter, the company closed five Extra Hiper stores and converted to Assai. Currently, eight stores are under construction; seven Assai (including five Extra Hiper conversion and two new stores) and one Minuto Pao de Acucar. These stores are expected to convert before third quarter 2017.

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.

Net revenue improved 2.2%, driven by strong sales recovery at both the online and offline channels.

Coming to the share price movement, CBD’s shares rallied 11.4% year-to-date, outperforming the Zacks categorized Retail-Supermarket industry’s growth of 3.3%.

 

Zacks Rank & Key Picks

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

Some better-ranked stocks include Burlington Stores Inc. BURL, The Children's Place, Inc. PLCE and Foot Locker, Inc. FL. While Burlington and Children’s Place sport a Zacks Rank #1 (Strong Buy), Foot Locker currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While Burlington has long-term earnings growth of 15.85%, Children’s Place’s long-term earnings growth rate is 8.00%. Foot Locker has growth rate is 9.71%.

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