October 26, 2017 / 10:35 PM / a year ago

UPDATE 2-Brazil's GPA books profit as Assai division offsets weak supermarkets

(Adds details on divisional results, store closures and conversions)

SAO PAULO, Oct 26 (Reuters) - Brazilian retailer GPA SA swung to profit on Thursday as its Assai “cash-and-carry” division continued a successful expansion, offsetting losses in the group’s traditional formats.

GPA, owned by France’s Casino Guichard Perrachon SA , reported a net profit of 72 million reais ($22 million) in the quarter, up from a 308 million loss a year ago, according to a securities filing. That beat an average estimate in a Thomson Reuters survey for a 32 million-real profit.

The swing to profit was driven by the strong performance of GPA’s Assai stores, which contributed 36 percent more to earnings before interest, tax, depreciation, and amortization (EBITDA) than a year earlier on improving gross profit margins.

GPA, like its arch rival Grupo Carrefour Brasil, has been betting big on the cash-and-carry format, which offers a wholesale experience to final consumers, as a three-year recession has pushed Brazilians to aggressively seek discounts.

As with Carrefour, the move appears to be paying off, and revenue has outpaced inflation in recent quarters.

However, GPA’s overall EBITDA dropped 9.6 percent to 411 million reais in the quarter, below a Reuters estimate of 530 million reais due to restructuring expenses and new valuations of the property and equipment in GPA’s traditional formats.

The retailer closed a net 39 stores in its traditional Multivarejo division in the quarter, including six supermarkets. GPA converted four stores to the Assai format and is in the process of converting eight more.

Earlier in October, GPA said sales at its Assai cash-and-carry stores open for at least 12 months, a measure known as same-store-sales, grew 7.7 percent. Same-store sales in the retailer’s traditional formats rose 0.6 percent, amid slowly improving consumer confidence.

The company’s traditional formats together posted a net loss of 85 million reais, while the Assai division posted a net profit of 113 million reais in the quarter.

$1 = 3.29 reais Reporting by Gram Slattery; editing by Grant McCool

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