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Companhia Brasileira de Distribuicao Q1 Sales Improve

Afterbearing the brunt of a weak economic scenario in Brazilin 2015, Companhia Brasileira de Distribuicao CBD also known as Grupo Pão de Açúcar (GPA) recently posted improved first quarter 2016 sales, despite a weak economic environment and restricted spending.

Net sales of this retailer increased 3% in the first quarter, which compared favorably with sales growth of just 0.2% in the preceding quarter. Assai Multivarejo continued to deliver stronger sales while Via Varejo generated its best sales performance since 2Q15, and witnessed market share gains.

Pao de Acucar opened one Minimercado Extra and one Assai store in the first quarter. For 2016, the company plans to continue to focus on higher-return formats (Assai and Proximity). CBD plans to open between 12-15 stores in the year, where 8 Assai, 2 Pao de Acucar, 4 Minuto Pao de Acucar and 1 Minimercado Extra are under construction.

The company operates through the food retail, cash and carry, electronics and home appliances retail (bricks and mortar), and e-commerce business segments. These segments are grouped into two large categories, namely Food Business (Multivarejo and Assai) and Non-Food Business (Viavarejo and Cnova).

Food Business

Food Business’ net sales increased 10.9% in the quarter. Sales growth was driven by solid performance of 96 Assai stores and improved sales performance at Multivarejo. It also compared favorably with preceding quarter growth of 6.7%.

Despite the economic slowdown, same-store sales in the Food category grew 6%, reflecting growth in customer traffic across all banners. It was significantly higher than 1.9% growth in the preceding quarter. Adjusted for the calendar effect, same-store sales in the Food segment was 3.1%.

Non-Food Business

Net sales of the Non-Food Business decreased 5.5% in the quarter. However, the decline was narrower than the preceding quarter’s decline of 6.2%.

Cnova: Category net sales increased 7.7% on a same store sales basis. Sales growth in the preceding quarter was 9.5%.

Viavarejo: Viavarejo’s net sales declined 12.7% in the quarter due to same-store sales decline of 11.8%. The net sales decline was narrower than the preceding quarter’s decline of 14.7%. The company witnessed sequential improvement in same-store sales trend. Viavarejo also continued the closure of lower performance stores. Mobile phones and sales of services grew sharply in the period compared to 1Q15.

Companhia Brasileira de Distribuicao has a Zacks Rank #4 (Sell).

Stocks to Consider

Better-ranked stocks in the retail sector include American Eagle Outfitters, Inc. AEO, Express, Inc. EXPR and The Children's Place, Inc. PLCE. While American Eagle and Express Inc. sport a Zacks Rank #1 (Strong Buy), Children’s Place carries a Zacks Rank #2 (Buy).

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