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UPDATE 1-Pão de Açúcar to increase sales 50 pct by 2015 -report
December 11, 2012 / 1:50 PM / in 5 years

UPDATE 1-Pão de Açúcar to increase sales 50 pct by 2015 -report

* Company sees gross revenue of 87.5 bln reais in 2015 -Valor

* Annual capital spending to rise nearly 80 pct in new plan

* Board expected to approve plan, consider franchise in 2013

SAO PAULO, Dec 11 (Reuters) - Grupo Pão de Açúcar SA , Brazil’s biggest retailer, plans to increase sales by about 50 percent and boost investments nearly 80 percent over the next three years, according to a report on Tuesday by newspaper Valor Economico.

The prospect of continued robust growth and increased capital spending suggests a strong bet that household consumption will continue to drive Brazil’s economy. Rising consumer debt has weighed on demand for appliances and electronics this year, but Pão de Açúcar appears focused on its food business for growth.

Valor, without saying how it obtained the information, reported that Pão de Açúcar’s strategic plan for 2013-2015 calls for 120 new Minimercado Extra supermarkets and 40 new wholesale Assai food stores to drive sales growth.

A Pão de Açúcar spokesman declined to comment on the report.

The retailer’s food business is seen expanding to 58 percent of revenue in 2015 from 54 percent this year, according to the report. Recently acquired home furnishings and electronics chains in its Viavarejo unit helped more than double sales over the past three years but have not proven as profitable as expected.

The strategic plan was approved by controlling shareholder Casino last month and is likely to be approved by the Pão de Açúcar board of directors on Friday, Valor reported.

Pão de Açúcar shares were little changed in early Tuesday trading at 91.52 reais, while the benchmark Bovespa stock index slipped 0.3 percent.

The plan projects gross revenue of 87.5 billion reais ($42.1 billion) in 2015, up from an estimated 57.4 billion reais this year, and investments of 3.2 billion reais in 2015, up from 1.8 billion reais this year, according to the newspaper.

Growing capital spending by Brazilian retailers contrasts with stagnant industrial investment, as weak global growth, transportation bottlenecks and a heavy tax burden choke the competitiveness of local manufacturers.

Pão de Açúcar’s board and executives have also discussed franchising the company’s stores, which would accelerate growth without as much investment, but the board will not decide on the matter until the end of 2013, Valor reported.

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