* Supermarket EBITDA margin seen sliding 0.5 p.p. in 2013
* Group needs Viavarejo turnaround to deliver stable margins
By Brad Haynes and Vivian Pereira
SAO PAULO, April 30 Grupo Pão de Açúcar
, Brazil's biggest retailer, is counting on a
turnaround in its appliance division to make up for shrinking
profit margins at its supermarkets as food inflation climbs to a
Pão de Açúcar's operating estimates for 2013, issued on a
Tuesday earnings call, forecast a decline of half a percentage
point in the operating profit margin of its food division. The
profitability of its Viavarejo electronics and home furnishings
unit will have to improve dramatically to deliver the stable
profit margin for the group that executives are aiming for.
The forecasts underline concerns triggered by first-quarter
results, released late on Monday, that showed profitability
falling in the food division as the group struggles to keep down
prices despite high inflation in Latin America's biggest
Shares of Pão de Açúcar fell 1.4 percent in afternoon Sao
Paulo trading after touching an eight-session low.
The retailer plans to boost investment by 27 percent this
year to about 2 billion reais ($1 billion), focusing spending on
its smaller Minimercado Extra supermarket format in order to
boost consolidated gross sales by at least 10 percent.
"We're quite optimistic about 2013," said Chief Executive
Eneas Pestana on the call with analysts. "We expect a year of
To achieve profitable growth, Pão de Açúcar will have to
finally wring the promised cost savings from the mega-merger
that formed its Viavarejo division, which has fallen short of
expectations in recent years.
Antitrust regulator Cade gave final approval for the merger
this month, removing the last barrier to consolidating
"Cade approval is a positive as it should prompt better use
of real estate, as well as accelerate margin gains," wrote
J.P.Morgan analyst Andrea Teixeira in a Tuesday note to clients.
Pão de Açúcar plans to boost the share of Viavarejo revenue
converted into earnings before interest, taxes, depreciation and
amortization - a measure of profitability known as the EBITDA
margin - to over 6.6 percent from around 5.3 percent last year.
Executives expect the EBITDA margin of Pão de Açúcar's food
division to fall to around 7.7 percent in 2013 from 8.2 percent
last year, leading to a roughly stable consolidated EBITDA
margin of around 7.2 percent.
French group Casino took control of Pão de Açúcar
from its founding family in June 2012.