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Companhia Brasileira to Gain From Assai, Multivarejo Strength

Zacks Equity Research
Companhia Brasileira (CBD) is set to benefit from Assai and Multivarejo units, which are anticipated to witness continued market share gains in 2018.
Companhia Brasileira (CBD) is set to benefit from Assai and Multivarejo units, which are anticipated to witness continued market share gains in 2018.

Companhia Brasileira de Distribuicao CBD has been gaining from strength in its Assai division for quite some time now.

The unit continued with its stellar show in second-quarter 2018, wherein gross sales at Assai surged 22.8% in local currency. The sturdy growth was driven by higher comps and store openings. Incidentally, Assai’s comps jumped 4.7% (excluding conversions), which also led to an increase of 200 basis points (bps) in market share. Management’s focus on making constant investments in this segment clearly reflects its robust prospects.

Incidentally, Companhia Brasileira is gearing up to expand its stores and thereby increase its market share. The company has been putting greater emphasis on renovating Extra banners, as it has been performing better than the non-renovated stores over the last three years. These renovations include not only the layout, but also new assortments and improvements in customer service, which, in turn, will generate higher sales. During the second quarter, the company opened 3 Assai stores, including one that was converted from Extra Hiper to Assai. The company plans to open 20 stores this year, including the converted ones.

Apart from Companhia Brasileira, many other retailers like Ross Stores ROST, TJX Companies TJX and Kohl’s KSS, among others, are gaining from store expansion initiatives.

Coming back to Companhia Brasileira, the company’s Multivarejo division’s performance has also been impressive of late. In the second quarter, gross sales at this division came in at R$7,030 million, while same-store sales grew 5.3%, excluding calendar effect. This was backed by enhanced sales across all banners (Extra Hiper and Pao de Acucar), which, in turn, led to market share growth of 100 bps. Also, the segment benefited from successful promotional activities and greater commercial actions, which drove sales volumes across all banners.

Improved sales and operational efficiency also benefited adjusted EBITDA margin, which expanded 90 bps to 5.6%. Additionally, the company renovated 6 Pao de Acucar stores under Generation 7 concept, which forms part of its plan to refurbish 20 stores in 2018. Also, the company plans to include 30 stores in its Premium Project to provide customers with enhanced experience along with quality perishables and an exclusive assortment.

For 2018, management envisions same-store sales at Assai to be more than the inflation level. Also, both Assai and Multivarejo are anticipated to witness continued market share gains.

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Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
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