July 24, 2018 / 1:06 PM / in 10 months

UPDATE 2-Via Varejo rallies on share conversion plan despite results miss

(Adds share price, recasts with share conversion plan)

By Gram Slattery

SAO PAULO, July 24 (Reuters) - Shares in Via Varejo SA , Brazil’s largest electronics retailer, jumped almost 4 percent on Tuesday as investors cheered a plan to unify share classes, even after the company posted quarterly profit that missed estimates.

In a Monday night securities filing, the firm said it would convert all its shares into a single class of common stock, after which all shares would be listed in the Novo Mercado, a segment of Brazil’s stock exchange with strengthened governance standards. Preferred shares would be converted into common shares using the 1:1 ratio.

The move is expected to increase liquidity and Via Varejo continues to be for sale, said Ronaldo Iabrudi, the co-vice chairman of food retailer GPA, Via Varejo’s parent.

After the announcement, Via Varejo reported second quarter net income of 20 million reais ($5.29 million). That was well above a loss of 85 million reais a year earlier, but it fell short of a Reuters consensus estimate of 40.4 million reais.

Same-store sales, a key metric of sales at stores open for at least 12 months, increased 5.8 percent year over year, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 6.1 percent to 394 million reais.

Via Varejo’s growth reflected an improving scenario for retailers in Latin America’s largest economy, and a successful digital-first strategy that has boosted margins. Still, like some e-commerce-heavy peers, Via Varejo has at times had trouble meeting analysts’ lofty expectations.

Holding back sales, management said, was the slower-than-expected development of digital initiatives such as Via Unica, a centralized database of customer information it is creating and an 11-day truckers strike in May that paralyzed much of the economy.

“In addition to the impact of the truckers’ strike, important projects such as Via Unica and our apps still didn’t contribute all they could to our results this quarter.” management said.

On the positive side, it posted solid television sales, selling more TV sets than cellphones for the first time, likely due to the World Cup.

The company said it opened 11 new stores in the period and was putting a special emphasis on its physically smaller “kiosk” format.

Units in Via Varejo, a blend of common and preferred shares that is the firm’s most liquid class, rose 3.8 percent in early morning trade, while common shares climbed 10 percent. Brazil’s Bovespa equities index was up a more modest 1.55 percent. ($1 = 3.78 reais) (Reporting by Gram Slattery; Editing by Jason Neely, Jeffrey Benkoe and Jonathan Oatis)

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