(Recasts with plan for renovations)
By Luciana Bruno and Brad Haynes
SAO PAULO, July 13 (Reuters) - The home furnishings division of Brazil’s biggest retailer, GPA, plans to boost investments in store renovations to sell more furniture, an executive told Reuters, after weak demand for electronics hurt the group’s second-quarter sales.
The appliance and furniture division, known as Via Varejo SA , will invest more than the 324 million reais ($103 million) of capital spending originally budgeted for 2015, said André Caio, head of the company’s furniture operation. Via Varejo invested 604 million reais last year.
Sales at Via Varejo stores open for at least 12 months tumbled 23.5 percent in the second quarter from a year earlier, according to a securities filing on Monday, dragging same-store sales for all of GPA down by 2.9 percent.
By renovating its Casas Bahia stores to feature model rooms, Via Varejo is hoping to increase sales of more profitable furniture, offsetting plunging demand for its home electronics and white goods, according to Caio. Via Varejo enjoys a fatter profit margin on sales of furniture made at its own factory.
“We’ve seen renovated stores increase sales by 20 percentage points compared to the rest,” he said in a telephone interview, The company would soon expand the renovations from a 59-store pilot to the rest of Casas Bahia’s 683 locations, he added.
Rising inflation, unemployment and interest rates have hurt consumer spending in Brazil, especially on home appliances, which lost key tax breaks as President Dilma Rousseff slashed stimulus in an effort to close a budget gap.
Overall, GPA reported a 6 percent rise in net revenue in the second quarter from a year earlier, as rapid expansion of its wholesale and e-commerce units offset weakness at Via Varejo.
Sales in the Cnova e-commerce unit more than doubled and nine new cash-and-carry Assai wholesale stores opened in the past year, helping to lift net revenue to 16.108 billion reais in the three months through June.
GPA shares rose 5 percent in Sao Paulo trading, rebounding from a 42-month low last week.
$1 = 3.1430 Brazilian reais Reporting by Brad Haynes and Luciana Bruno; Editing by Bernadette Baum, Bernard Orr