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GPA Posts Biggest Drop Since October On Decline In Profitability

Published on May 12 2016 7:21 AM in Retail tagged: Trending Posts / Brazil / Pao de Acucar / GPA

GPA Posts Biggest Drop Since October On Decline In Profitability

Cia. Brasileira de Distribuicao SA, the Brazilian retail giant, fell the most in seven months in Sao Paulo trading after the company said increased competition hurt profit margins in the first quarter.

GPA, as the company is known, fell as much as 7.9 percent to 45.53 reais, the biggest intraday loss in the benchmark Ibovespa index and the stock’s largest decline since October. The shares traded down 3.9 percent to 47.51 reais at 2:12 p.m. local time.

GPA’s appliance and electronics unit Via Varejo posted a 13 percent drop in net revenue in the quarter from a year earlier. A decline in sales of more expensive items at Via Varejo, combined with aggressive price discounts in GPA’s supermarket operations led to a 2.2 percentage-point slide in the company’s gross margin to 21.8 percent.

Brazilian retailers are battling for customers attention amid Brazil’s deepest recession in at least a century. Retail sales fell 5.7 percent in March from a year earlier, the national statistics agency said Wednesday. Consumer confidence fell to its lowest level on record in April as unemployment continued to rise.

“With a negative gross domestic product and a drop in consumption, shares are going down,” said Ari Santos, a trader at brokerage H.Commcor in Sao Paulo. “First-quarter results are also weighing” on the stock.

Chief Executive Officer Ronaldo Iabrudi said GPA had to sacrifice margins to curb market-share losses. On a conference call with investors, he said the company recovered market share during the past two quarters.

Profit margins should start recovering by the third quarter, Chief Financial Officer Christophe Hidalgo said on the same call. The company is renegotiating agreements with suppliers and trying to reduce operational expenses, he said.

GPA posted a 59 million reais loss in the period, the company’s first quarterly loss since 2006.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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