Shares of Companhia Brasileira de Distribuicao CBD dropped to a 52-week low of $27.58 on May 27 after the company reported sluggish results in the first quarter of 2015 on May 7. In fact, share price of this Brazilian retailer has been losing momentum since then and eventually closed at $27.62 on May 27.
Sluggish First Quarter Results
On May 7, CBD reported a year-over-year decline in profit and sales in the first quarter of 2015, mainly due to a weak economic scenario in Brazil.
In the first quarter of 2015, CBD’s adjusted net income decreased 14.3% (in local currency) from the year-ago quarter. The year-over-year decline in profits reflects a rise in expenses and thereby margin contraction. A difficult macro-economic environment also led to the soft results. In the preceding quarter, the company posted growth of 21.3%.
Consolidated net sales climbed 14.8% during the first quarter, driven by strong organic growth and new store openings. However, sales were worse than the preceding quarter’s growth of 16.2%. Excluding the effects from the Cdiscount consolidation, net sales growth was only 5.9% in the quarter.
The company posted net same store sales growth of 4% in the reported quarter. However, it compared unfavorably with 4.3% growth in the preceding quarter as Viavarejo’s same-store sales declined 2.3% due to store closures.
Gross margin declined 100 basis points on a year-over-year basis to 24%, mainly due to Cnova and Assaí mix effect. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) decreased significantly by 9.6%. Adjusted EBITDA margin declined 150 basis points to 5.5% in the first quarter. Adjusted EBITDA growth in the preceding quarter was 21.7%. (Read: Companhia Brasileira de Distribuicao Posts Weak Q1 Sales).
Companhia Brasileira de Distribuicao has a Zacks Rank #4 (Sell).
Stocks to Consider
Better-ranked stocks in the industry include Gordmans Stores, Inc. GMAN, Ingles Market, Inc. IMKTA and The Kroger Co. KR. While Gordmans Stores sports a Zacks Rank #1 (Strong Buy), Kroger and Ingles Market carry a Zacks Rank #2 (Buy).
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