UPDATE 1-Brazil retailer GPA profit surges more than expected

miércoles 23 de julio de 2014 22:38 GYT
 

(Adds details of second-quarter earnings)

SAO PAULO, July 23 (Reuters) - GPA SA, Brazil's biggest retailer, posted a stronger-than-expected surge in profit on Wednesday as competitive pricing and cost controls helped the company prosper in a sluggish retail landscape.

Second-quarter net income of 358 million reais ($162 million) was more than four times the profit of a year ago, when the diversified retailer set aside cash for possible tax, labor and merger expenses. The earnings easily beat an average estimate of 265 million reais in a Reuters survey of analysts.

GPA's economies of scale and aggressive price strategy have helped it skirt a Brazilian slowdown this year, as meagre job creation and weak wage growth weighs on household demand.

To maintain robust sales growth, GPA has cut prices at supermarkets and appliance stores, squeezing its gross margin by 0.3 percentage points to 26.0 percent. Still, more efficient operations lowered operating expenses by 2.0 percent, bolstering operating profit.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, climbed 79 percent to 1.090 billion reais, in line with an average forecast of 1.103 billion reais.

($1 = 2.21 Brazilian reais) (Reporting by Marcela Ayres; Editing by Chris Reese and Kenneth Maxwell)