Companhia Brasileira De Distribuicao Q2 Sales Improve

After improved sales performance in the first quarter, Companhia Brasileira de Distribuicao (NYSE:CBD) also known as Grupo Pão de Açúcar (GPA) recently posted yet another quarter of strong sales, despite a weak economic environment in Brazil and restricted spending.

Net sales of this retailer increased 5% in the second quarter of 2016, which compared favorably with sales growth of 3% in the preceding quarter, driven by comparable store sales growth. Comparable store sales grew 3.2% in the second quarter as against 0.7% decline in the preceding quarter.

Assai Multivarejo continued to deliver stronger sales along with better sales trend at Multivarejo, supported by acceleration in the sales recovery at Via Varejo.

Pao de Acucaropened 9 stores in the quarter, including 7 in the food segment (5 Minuto Pão de Açúcar, 1 Assaí and 1 Pão de Açúcar), 1 Casas Bahia and 1 Ponto Frio. A total of 59 stores were opened in the last 12 months. For 2016, the company plans to continue to focus on higher-return formats (Assai and Proximity).

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 11.3% in the quarter, which compared favorably with preceding quarter’s growth of 10.9%.

Despite the economic slowdown, same-store sales, adjusted for the calendar effect, in the Food category grew 7.1%. Sales growth was driven by solid performance of Assai stores and improved sales volume performance at Multivarejo. It was significantly higher than 3.1% growth in the preceding quarter.

Non-Food Business

Net sales of the Non-Food Business decreased 2.8% in the quarter. However, the decline was narrower than the preceding quarter’s decline of 5.5%.

Cnova: Category net sales decreased 7.6% in the quarter.

Viavarejo: Viavarejo’s net sales grew just 0.3% in the quarter as a result of the store closures in the second half of 2015 and the first quarter of 2016. We note that sales had declined 12.7% in the preceding quarter. The company witnessed sequential improvement in same-store sales trend. Same same-store sales grew 2.6% as against a decline of 11.8% in the preceding quarter, supported by banner conversions and solid sales of services in the period.

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

Stocks to Consider

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