Brazil retail giant chairman dumps $736 million in shares

SAO PAULO Fri Jan 11, 2013 4:46pm EST

SAO PAULO (Reuters) - The chairman of Brazil's biggest retailer, Grupo Pão de Açúcar SA, sold 1.5 billion reais ($736 million) in preferred shares on Friday, a source with knowledge of the transaction said, after the company posted the weakest sales growth since 2009.

The chairman, Abílio Diniz, whose father founded the retail giant, sold the stake - a third of his preferred shares - as part of a plan to invest in other Brazilian companies, the source said.

Relations between Diniz and French group Casino (CASP.PA), which took control of Pão de Açúcar last year, have soured since the deal-making chairman attempted a failed merger with Casino's rival Carrefour (CARR.PA). Diniz's investment in poultry processor Brasil Foods (BRFS3.SA) sparked media reports that he was angling for a seat on a board where he would hold more sway.

But the timing of the share sale, following a disappointing year-end performance, may add to doubts about the robust retail engine that kept Brazil's economy out of recession last year.

Gross sales at Pão de Açúcar's (PCAR4.SA) food and appliance stores open for at least a year rose 5.8 percent in the fourth quarter from a year before, slowing sharply from 8.5 percent growth a year earlier. It was the weakest expansion since the 4.6 percent year-on-year growth in the first quarter of 2009.

"Sales are just adjusting to a new reality," Pão de Açúcar Investor Relations Director Vitor Fagá said in a telephone interview. "Estimates in general are showing that growth in the retail segment will be more moderate from now on."

Preferred shares of Pão de Açúcar closed 3.2 percent lower on Friday at 89 reais per share, the price at which 17.12 million preferred shares were auctioned, according to exchange operator BM&FBovespa. The stock is still up more than 50 percent over the past year.

HOLIDAY LETDOWN

Pão de Açúcar's sluggish performance is the latest signal that Brazilian consumer demand ended 2012 on a weak note.

The fourth quarter is especially important to retailers because Brazilians receive bonuses that coincide with year-end holidays. Early indicators suggest consumers put more of their bonuses toward paying down household debts, which have climbed to an all-time high.

The government has repeatedly said that the last quarter of 2012 would mark the start of an economic rebound from the sharp slowdown in the first nine months of the year.

On Thursday, shares of Cia Hering SA (HGTX3.SA) tumbled 12 percent to a five-month low after the apparel and textile retailer reported weaker-than-expected sales for the period.

Hering shares recovered 2.1 percent on Friday, but concerns spread in the sector to low-cost retailer Lojas Americanas (LAME4.SA), which lost 2.9 percent.

Pão de Açúcar said in a statement that same-store sales rose 5.8 percent on an annual basis in the fourth quarter and expanded 7 percent for the full year. In 2011, same-store sales grew 8.8 percent.

Net sales rose 9.3 percent in 2012 to 50.92 billion reais ($25 billion), while gross sales netted 57.23 billion reais, in line with the company's goal of 57.2 billion reais for the year.

Pão de Açúcar also reported on Friday that it opened 95 stores in 2012. The group closed 25 stores in the first nine months of 2012.

(Writing and additional reporting by Brad Haynes and Guillermo Parra-Bernal; Editing by David Gregorio, Grant McCool, Gary Hill)

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