* 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 five-year high.
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 economy.
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 robust growth."
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 operations.
"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.
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