Companhia Brasileira (CBD) Q2 Earnings & Revenues Tumble Y/Y – July 29, 2021

Brazilian sales company (CBD quick quoteCBD Free Report) or Grupo Pao de Acucar delivered soft results for the second quarter of 2021, due to pandemic-related restrictions to contain the new virus wave and hard comparisons with the increase in demand in the same period of the previous year due to the initial stockpiling. The results received partial relief due to the strict cost control as well as a constant strength in the digital ecosystem.

In the second quarter of 2021, Companhia Brasileira net income from continuing operations was R $ 4 million ($ 0.75 million), a significant decrease from R $ 86 million ($ 16.2 million) in the same period last year. The downside can be due to lower earnings.

Results in detail

Gross sales for the quarter were R $ 12,985 million ($ 2,450.4 million). Compared to the previous year, gross sales decreased by 6.5% in local currency. This could be due to the impact of the restrictions related to the new coronavirus wave, along with tough comparisons with the surge in demand in the same period last year. However, online sales remained stable and increased at GPA Brazil and Grupo Exito.

In GPA Brazil, the company benefits from its delivery models, including same-day delivery, express and Click & Collect; Traditional delivery or next day delivery; and Last Mile or Delivery in the Next Hour – James Delivery and Open Platform. In addition, the company benefits from its loyalty program, app development efforts, prudent alliances, innovation and data monetization platform. Grocery e-commerce grew 32% year over year, accounting for 8.2% of GPA Brazil’s total grocery sales.

Gross profit decreased 4.9% in local currency to R $ 3,011 million (USD 568.2 million) and the gross margin increased 10 basis points (bps) to 25.4%. Adjusted EBITDA decreased 7.7% to R $ 899 million (USD 169.6 million), with the adjusted EBITDA margin declining 20 basis points to 7.6%.

Image source: Zacks Investment Research

Segment details

GPA Brazil’s gross sales decreased by 12.1% in local currency to R $ 7,062 million ($ 1,304.9 million). Sales were impacted by hard comparisons with the same period last year, which benefited from initial inventory trends; strict measures to contain the new virus wave in the reporting quarter; Closure of 32 stores in 2020 and transfer of non-food product sales to the online channel. This was partially offset by robust online sales (up 32%) and the expansion of the proximity format. Sales in the same store, excluding gas stations and drug stores, increased 4.2% compared to the second quarter of 2019.

The segment’s gross margin was 25.6%, which can be attributed to efficient trading dynamics and optimized logistics costs. SG&A expenses decreased by 13.4% despite rising inflation. The disadvantage resulted from the cost-cutting efforts undertaken over the past 12 months; a sharp drop in operating costs and a drop in administrative costs. The adjusted EBITDA margin increased 60 basis points to 8.3%.

On November 27, 2019, the company acquired 96.57% of the share capital of Grupo Exito. The unit’s gross sales increased 1.3% to R $ 5,905 million ($ 1,114.3 million). The effects of the pandemic (comparisons with the same period in the previous year and strict regulations in the reporting quarter, including temporary shop closures) and protests in Colombia in May and June increased the share of omnichannel sales and innovative formats in the sales mix. Solid contributions from complementary business and real estate growth supported the segment.

Revenue in the same business excluding gas stations and drug stores increased 7.2% compared to the second quarter of 2019.

Gross margin rose 30 basis points to 24.9% on solid online sales and the recovery in complementary businesses, partially offset by volume declines. Selling, general and administrative expenses rose as a percentage of sales by 120 basis points to 18.1%. The adjusted EBITDA margin slumped 90 basis points to 7.1%.

Other details

Companhia Brasileira ended the quarter with cash and marketable securities of R $ 4,925 million ($ 990.3 million) and total equity of R $ 15,401 million ($ 3,096.7 million). Management made capital investments of R $ 261 million ($ 49.3 million) in the second quarter.

In the second quarter, the company closed three stores in GPA Brazil. Two branches were opened in Grupo Exito, one was opened through renovation and one was closed. Management ended the quarter with a total of 1,487 stores, including 871 GPA Brazil stores and 616 in Grupo Exito.

This number 4 (Sell) Zacks company has fallen 7.2% over the past three months while the industry has grown 2.8%.

Don’t miss out on these retail bets

Walmart (WMT quick offerWMT Free Report) with a Zacks Rank # 2 (Buy) has a long term earnings growth rate of 5.5%. You can see the full list of current Zacks # 1 Rank (Strong Buy) stocks here.

goal (TGT quick offerTGT Free Report), ranked # 2 in Zacks, has a long-term earnings growth rate of 13.3%.

Cost co (Costs quick quoteCOSTS Free Report), ranked # 2 in Zacks, has a long-term earnings growth rate of 9.1%.