November 7, 2019 / 4:18 PM / 11 days ago

UPDATE 1-Carrefour Brasil may curb margin gains to boost revenue amid challenging economy

(Adds details, analysts’ comments and share performance)

By Gabriela Mello

SAO PAULO, Nov 7 (Reuters) - Carrefour Brasil is willing to curb margin gains to boost revenues and broaden its market share while the economy remains challenging and competition intensifies in the country, executives said on Thursday.

The subsidiary of French group Carrefour SA has increased investments in recent years to open new business fronts in a move to secure food retail leadership in Brazil, the parent company’s largest market after France.

“If the price to be paid to maximize growth in reais is lowering the margins a bit, we will do it,” Chief Financial Officer Sébastien Durchon told journalists after discussing third-quarter earnings in a separate call with analysts.

He said that Carrefour Brasil is already reaping the benefits of this strategy, with market share gains in all formats.

Now the company is investing to acquire and develop new digital and financial capacities to provide customers with an e-commerce platform fully integrated with brick-and-mortar stores, Durchon added.

Though the retailer has not yet set a 2020 budget and goals, he said, the plan is to maintain the expansion pace of its wholesale unit Atacadão, with 20 new openings per year, and to accelerate other formats, including convenience stores under the “Express” brand.

On Wednesday night, Carrefour Brasil posted a 21% rise in third-quarter net income from a year ago to 430 million reais ($105.3 million).

Analysts at BTG Pactual considered the company’s earnings “decent” despite a challenging outlook. For Bradesco BBI, overall numbers came in line with expectations, but Atacadão’s performance disappointed in the period.

“This was a tough quarter for Atacadão, with a sharp deceleration of same-store-sales growth and decline in EBITDA margin,” they wrote in a report, citing tougher competition in the segment.

Carrefour Brasil’ shares were down 0.5% in early afternoon trading at 18.99 reais. (Reporting by Gabriela Mello Editing by Chizu Nomiyama and Steve Orlofsky)

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