Assaí (ASAI3), Carrefour (CRFB3) or GPA (PCAR3): which food retailer stood out among the previous data for the 1st quarter?

The day before, previews for the first quarter of 2022 of the largest Brazilian food retailers were released: GPA – Grupo Pão de Açúcar – (PCAR3), Carrefour Brasil (CRFB3) and Assaí (ASAI3), with the data in general, pointing to recovery of the companies versus the fourth quarter of 2021.

Assaí had record sales for a first quarter, registering an increase of 21.1% in annual revenue. GPA (PCAR3) had a 2.2% growth in total sales in continuing operations in the first quarter of 2022, reaching R$11.1 billion; the number considers stores of the so-called “Novo GPA Brasil”, of Grupo Éxito, the company’s arm in the rest of Latin America, and gas stations. Carrefour, in turn, had a 14% increase in sales in the 1st quarter, with a gain in market share.

As Goldman Sachs points out, the view on the numbers is positive, with sales increasing sequentially throughout the quarter and volumes gradually recovering.

However, analysts reckon, companies continue to see some degree of nominal same-store sales (SSS) growth reported below home food inflation (13.7% in March over the past twelve months, according to IBGE).

Meanwhile, consistently with previous quarters, the cash & carry format (or cash & carry) continued to outperform.

XP points out that the positive highlight was Atacadão, Carrefour’s cash and carry operation, while the negative one was the GPA Brasil operation.

“However, it is important to note that we still do not have visibility of profitability, which we see as an important metric to set the tone for our reading of the first quarter results”, point out analysts Danniela Eiger, Thiago Suedt and Gustavo Senday, analysts who sign the report.

They also consider that the closing of Extra stores was a favorable wind for Carrefour’s retail operation, as they temporarily lost a competitor, and a headwind for GPA Brasil, as their stores had rupture issues arising from adjustments in the logistics network.

XP points out that the closing of Extra was a challenge for GPA both in food retail (SSS ex-gasoline up 1%) and in gas stations. However, Grupo Éxito’s performance remained strong, with SSS up 21% year-on-year.

Although Carrefour’s retail operation remains below Atacadão’s, it reported a strong quarterly recovery, with SSS up 3.1%, with food up 8.4% while non-food remained weak (SSS down 5% ) mainly driven by the electronics category (about 55% of the segment), which dropped double-digits. XP reinforces that the positive impact of the closing of Extra stores during the quarter should be temporary, since the Assaí stores should open from the third quarter.

Credit Suisse also points out that GPA is still going through a transition period after the divestment of the Extra Hiper stores, with reorganized logistics leading to a lack of inventories.

Analysts also highlighted that the premium brand Pão de Açúcar, which accounts for almost half of the ‘new’ sales of GPA Brasil, was also affected by the lower availability of imported products due to the lack of packaging.

Assaí, on the other hand, presented a promising performance in the quarter, according to Credit analysts, driven by a solid sales execution with the correct assortment of the regional portfolio and greater promotional efforts, despite the trends of reduction in consumption.

Itaú BBA also assessed that, even with the weaker sales performance in January, Assaí recorded same-store sales growth of 6.7% in the quarter, decelerating in relation to the strong 1Q21 of 11.2%, but underscoring the resilience of the format cash and carry and marking a recovery from the 3% deterioration recorded in 4Q21.

The accelerated growth of the SSS and the opening of stores took gross revenue to R$ 12.5 billion, very much in line with the bank’s expectations. The bank maintains an outperform rating (performance above the market average) for the paper, and a target price of BRL 21, compared to Tuesday’s (19th) price of BRL 16.34.

As for Carrefour, BBA analysts point out that the company recorded good numbers in both cash and carry and retail, with gains in market share.

Itaú BBA highlights that the retailer gained 1 percentage point (pp) of market share in 1Q22, mainly driven by the Atacadão numbers. The division recorded gross revenue 3% above the bank’s estimates, driven by productivity gains – with SSS gain of 9.2% (4.7 percentage points above estimates) – and area expansion.

The retail division benefited from a recovery in volumes in the food category in 1Q22. SSS (ex-gasoline) reached 3.1% (impacted by the still negative moment in the non-food categories).

The Carrefour bank, on the other hand, showed healthy growth. The increase in revenue was 11% year-on-year, positively impacted by the performance of the Atacadão credit card and the growth in cross sell and new products.

In digital, emphasizes XP, Carrefour continues with a good performance. Carrefour’s online Gross Merchandise Volume (GMV) continued to grow strongly (up 51% year-on-year), with food as a highlight (up 153%) and Atacadão an important driver of this growth. since it already represents almost 60% of total food GMV. As a result, CRFB’s food GMV already exceeds that of GPA Brasil by more than 40% (excluding Extra).

Recommendations: GPA is viewed with greater skepticism

BBA maintains an outperform recommendation (performance above the market average) for CRFB3, with a target price of R$ 24, or a potential upside of 9% in relation to the previous day’s closing.

However, the bank’s analysts pointed out, given the share’s appreciation in recent months (year-to-date, the share is up about 45%), they do not see clear short-term catalysts for the action until there is more information on the evolution of the integration process with BIG (particularly the savings of existing stores). Thus, it maintains its projections until it revises the estimates.

The same bank also has an outperform recommendation, with a target price of R$21 (28.5% upside) for Assaí. Analysts saw the numbers as in line with expectations, but acknowledged a possible positive surprise for investors after the SSS slowdown reported in the fourth quarter. “However, despite the company’s attractive valuation, we believe that any short-term triggers will be highly dependent on the market’s perception of the converted Extra stores, which are not expected to open before the second half of 2022,” they point out.

Credit Suisse and Goldman Sachs have recommendations for Assaí and GPA. The Swiss bank has an outperform recommendation for ASAI3 with a target price of BRL 20 (upside of 24%) and neutral for PCAR3, with a target of BRL 29, or upside potential of 22%. Goldman also has a more positive buy view for ASAI3, with a target price of BRL 21 (upside of 28.5%), while the recommendation is neutral for GPA, with a target price of BRL 27 (upside of 14%).

XP has a preference for Assaí, with a buy recommendation and a target price of R$22 (upside of 34%), while Carrefour and GPA have a neutral recommendation, with respective target prices of R$22 (slight decrease of 0.27 %) and R$32 (35% upside). Morgan Stanley, in turn, has an overweight recommendation (exposure above the market average) for Carrefour and Assaí, while it has an equalweight recommendation (exposure in line with the market average) for GPA.

Thus, despite Carrefour being seen as a highlight among the previews of 1Q22, analysts point to the strong performance in the year for the shares as a limiting factor for higher increases in the stock, as highlighted by BBA, with the great catalyst being more information on synergy with the BIG. Meanwhile, ASAI3 and PCAR3, although they also record high in 2022, have more modest gains than CRFB3, of 31% and 11% respectively. The scenario for GPA is seen with less optimism, while the greater spirit with Assaí stands out precisely for its position in cash and carry, which has gained space amid an environment of higher inflation, with consumers looking for lower prices.

Thus, XP highlights that Assaí should present a benefit in the short-medium term in relation to the more challenging macro scenario in which we are living, being a defensive and resilient role, in addition to presenting a lot of growth ahead.

At 11:11 am (Brasília time), ASAI3 assets were the highlight among the companies that released the previews, with gains of 2.51%, at R$ 16.75, while CRFB3 registered slight gains of 0.73%, R$22.22, and PCAR3 rose 0.21% to R$23.81.

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