UPDATE 1-Brazil retailer Pão de Açúcar profit surges 70 pct

Wed Oct 16, 2013 8:18pm EDT

* Growing market share, cost-cutting help beat forecasts

* Cash and carry stores expanding as Wal-Mart retreats

By Brad Haynes

SAO PAULO, Oct 16 (Reuters) - Grupo Pão de Açúcar , Brazil's biggest retailer, beat analyst forecasts on Wednesday with a 70 percent jump in profit due to robust sales growth and streamlined operations.

Pão de Açúcar reported a third-quarter profit of 357 million reais ($165 million), up 70 percent from a year earlier, according to a securities filing. Excluding non-controlling shareholders, net income rose to 282 million reais, beating an estimate of 241 million reais in a Reuters poll.

By cutting administrative costs in its supermarket unit and streamlining distribution of its home furnishing business, the retailer was able to boost profit margins even though high inflation has burned rival retailers.

Wal-Mart Stores Inc, the third largest retailer in the country, said on Tuesday it is closing several unprofitable stores in Brazil.

Pão de Açúcar is pressing ahead with growth plans, however, reaffirming on Wednesday that it would invest up to 2 billion reais in 2013 and expand food sales area by over 6 percent.

Net sales grew 15 percent from a year earlier as the group opened new stores, led by the expansion of its Assai cash and carry brand. So far this year Assai opened its first stores in five new states, where it has achieved "better-than-expected sales." The brand is set to open five more stores this year.

The larger role of the cash and carry business as well as the impact of rapidly rising food costs pinched the gross margin of Pão de Açúcar's food business, but the group offset that pressure with more efficient distribution in its appliance unit.

Ongoing consolidation of the merger that formed the appliance and furniture unit, ViaVarejo SA, lifted its operating profit by 55 percent and raised its contribution to net income from one third to one half of the group's total.

The group's earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, rose 30 percent to 1.036 billion reais, above an average forecast of 960 million.

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