October 28, 2016 / 11:57 AM / 2 years ago

UPDATE 2-Brazil's GPA sharpens focus on cash-and-carry to offset downturn

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SAO PAULO, Oct 28 (Reuters) - GPA SA, Brazil’s largest diversified retailer, said on Friday it is stepping up the opening of more cash-and-carry stores over the next year and enhancing cost-efficiencies in its appliance and e-commerce units in a bid to return to profit after six straight quarters of losses.

São Paulo-based GPA expects to convert as many as 20 Extra hypermarket stores into Assai cash-and-carry stores next year, Chief Executive Officer Ronaldo Iabrudi told investors in a Friday conference call to discuss third-quarter earnings. To boost sales in the food division, GPA will keep implementing aggressive discounts and consumer loyalty actions, he added.

The sharper focus on cash-and-carry comes after revenue in the segment surged almost 46 percent last quarter, the best-ever quarterly performance for the activity, he said. In contrast, food sales rose 14 percent in the third quarter on an annualized basis.

“The rate and the timing of conversions will depend on our investment analysts - we want to convert as many stores as possible at the lowest cost,” Iabrudi said, noting that he wants to take the Assai retail format to 19 Brazilian states in 2017.

GPA, a subsidiary of French retailer Casino Guichard Perrachon & Cie, lost a net 308 million reais ($97.3 million) last quarter, well above the 65.52 million reais loss forecast by analysts polled by Reuters.

GPA’s results were particularly hurt by a 38.3 percent drop in sales at its CNova online appliance retailer as Brazil’s consumers are stuck in the longest recession since the 1930s.

But prospects for GPA’s non-food division should improve gradually as the company kicks off the integration of CNova NV’s Brazilian unit and Via Varejo SA, which operates the group’s physical store chain. The merger should generate cost savings of 245 million reais annually, executives said on the call.

Consolidated sales across all departments rose 4.4 percent to 15 billion reais.

The company’s preferred shares rose 2.3 percent to 59.22 reais in early afternoon trade, indicating investors are confident in its strategy to offset the downturn.

Earnings before interest, taxes, depreciation and amortization increased 4.2 percent to 503 million reais, above analysts’ expectations of 452.75 million reais.

$1 = 3.1645 Brazilian reais Reporting by Ana Mano and Alberto Alerigi; editing Lisa Von Ahn and G Crosse

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