July 28, 2016 / 1:35 PM / in 2 years

UPDATE 1-Brazil's GPA slumps after bigger-than-expected profit miss

(Recasts to add details on shares, comments throughout)

By Ana Mano

SAO PAULO, July 28 (Reuters) - Shares in GPA SA posted their steepest decline in almost eight months on Thursday after expenses and fallout from a deep recession led Brazil’s biggest retailer to post a second-quarter loss five times bigger than expected.

The stock shed 5.2 percent to 51 reais, the biggest intraday decline since Jan. 13. São Paulo-based GPA, which is controlled by France’s Casino Guichard Perrachon & Cie, lost 583 million reais ($179 million) last quarter, missing a Thomson Reuters consensus estimate of 102 million reais.

In a securities filing, GPA said one-off charges related to revised tax contingencies and the costs associated with an internal investigation were behind the losses. Net financial expenses rose sharply in the quarter, reflecting higher borrowing costs in the period.

An aggressive pricing policy to retain customers amid Brazil’s toughest downturn in eight decades led gross profit down 1.6 percentage points as a share of revenues, UBS Securities analyst Gustavo Piras Oliveira said. About 56 percent of gross revenues at GPA comes from food sales.

Still, adjusted earnings before interest, taxes, depreciation and amortization was 760 million reais, beating consensus estimates of 461.4 million reais for the quarter.

Management is scheduled to discuss second-quarter results at a conference call later in the day.

$1 = 3.2592 Brazilian reais Reporting by Ana Mano; Editing by Susan Thomas and Bill Trott

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