Companhia Brasileira De Distribuicao Q3 Sales Sluggish

After an improved sales performance in the first half of the year, Companhia Brasileira de Distribuicao (NYSE:CBD) , also known as Grupo Pão de Açúcar (GPA) recently posted weak third-quarter sales results.

Net sales of this retailer increased 4.4% in third-quarter 2016, driven by comparable store sales growth. Net sales growth, however, compared unfavorably with sales growth of 5% in the preceding quarter due to a weak economic environment in Brazil and restricted spending. Comparable store sales grew 1.9% in the third quarter compared with 3.2% growth in the previous quarter.

Assai Multivarejo continued to deliver stronger sales alongside witnessing a better sales trend at Multivarejo, supported by acceleration in sales recovery at Via Varejo.

Pao de Acucar opened 4 stores in the third quarter (3 Assaí and 1 Casas Bahia), bringing the total store openings in the last 12 months to 40 stores. Currently 15 stores are under construction: 9 Assaí stores, including 2 conversions of Extra Hiper, 1 Pão de Açúcar and 5 Minuto Pão de Açúcar stores. For 2016, the company plans to continue focusing 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 14.0% in the quarter, up from the preceding quarter’s growth of 11.3%.

Despite the economic slowdown, same-store sales in the Food category grew 8.9%. Sales growth was driven by solid performance of Assai stores and improved sales volume performance at Multivarejo. It was higher than 7.1% growth in the preceding quarter.

Non-Food Business

Net sales of the Non-Food Business decreased significantly by 10.1% in the quarter. The decline was wider than the preceding quarter’s decline of 2.8%.

Cnova: Category net sales fell 38.3% in the quarter, much wider than the preceding quarter’s decline of 7.6%.

Viavarejo: Viavarejo’s net sales grew just 0.4% in the quarter, still bearing the brunt of store closures in the second half of 2015 and the first quarter of 2016. However, it improved from 0.3% growth in the preceding quarter.

Same same-store sales grew 1.8% compared with 2.6% growth in the preceding quarter, due to a challenging macroeconomic scenario, and a still sluggish electronics and home appliances market.

Zacks Rank

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

Some well-positioned retailers include The Children's Place, Inc. (NASDAQ:PLCE) , Urban Outfitters Inc. (NASDAQ:URBN) and Tilly's, Inc. (NYSE:TLYS) . All these sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children’s Place has an average positive earnings surprise of 33.06% in the trailing four quarters. It also has a long-term earnings growth rate of 10.33%.

While Urban Outfitters has a long-term earnings growth rate of 15.00%, Tilly’s has a growth rate of 15.50%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>