Carrefour Brasil eyes higher sales even if economy worsens amid COVID-19

SAO PAULO (Reuters) - Carrefour Brasil SA CRFB3.SA sees strong sales in coming months even if the Brazilian economy further deteriorates, executives said on Tuesday, as Latin America's largest nation suffers the worst coronavirus outbreak in emerging markets.

FILE PHOTO: The logo of France-based food retailer Carrefour is seen on shopping trolleys in Sao Paulo, Brazil July 18, 2017. REUTERS/Paulo Whitaker

“We keep seeing a good sales pace even after the peak seen in March, with lower customer flow but larger purchases,” Chief Executive Noel Prioux told journalists on an earnings call, citing the strong performance of Easter and Mother’s Day sales.

Chief Financial Officer Sébastien Durchon added that about 85% the business is food retailing, which is more resilient than other retail during a downturn. “The crisis may put pressure on purchasing power, but people will never stop eating,” he noted.

Despite strong sales, the company saw higher taxes and financial expenses drag first-quarter net income 16% lower, according to a securities filing late on Monday.

Carrefour Brasil shares slipped 2.2% in Tuesday trading, among the worst performers on Brazil's benchmark Bovespa stock index .BVSP, which was up 0.9%.

The local subsidiary of France's Carrefour SA CARR.PA has secured a credit line of 1.5 billion reais ($259 million) and needs no other financing this year, Durchon said.

The group has also maintained an ambitious expansion plan to open 20 brick-and-mortar stores per year under the wholesale banner Atacadao, which the executives see in “an ideal position” to face tougher economic conditions ahead.

Four new Atacadao stores have already opened this year and 12 more are under construction. Another 30 stores recently acquired from smaller rival Makro are expected to be converted to the Atacadao brand as soon as antitrust authorities sign off.

“If (antitrust approval) happens between August and September we should be able to convert most of them this year,” the CFO said.

The company also plans to change its online sales platform under the flagship brand Carrefour between July and August to make it more agile, Prioux added.

“The company is likely to be even more well-positioned on its foods e-commerce given the acceleration seen in this market, which caught many competitors unprepared,” Credit Suisse analysts wrote in a report.

They saw the company’s first-quarter results as “not great” due to lower profitability amid higher provisions in finance division Banco Carrefour, along with weaker sales in gas stations.

Durchon told investors on the call that Banco Carrefour is ready for a potential deterioration in Brazil’s economy, ruling out a divestment to minimize risk.

($1 = 5.7902 reais)

Reporting by Gabriela Mello; Editing by Brad Haynes and Nick Zieminski