October 31, 2019 / 4:51 PM / 18 days ago

UPDATE 1-Brazil GPA sees stronger 2020 sales after store conversions, renovations

(Adds details, analyst’s comments and shares performance)

By Gabriela Mello

SAO PAULO, Oct 31 (Reuters) - Brazilian retailer Grupo Pão de Açúcar SA expects better sales after it completes supermarket conversions and renovations in early 2020, its chief executive said on Thursday.

“Consumption prospects are more positive, which alongside our efforts to conclude conversions and renovations in the first months of 2020, will allow us to enter an even better cycle,” CEO Peter Estermann told analysts and investors in a call on quarterly results.

GPA’s shares edged down 0.4% to 82.73 reais, trimming gains so far this year to around 3%.

The company late Wednesday reported a 30% rise in third-quarter net income from a year ago, helped by cost-cutting and sales growth led mostly by its wholesale unit Assaí.

BTG Pactual analysts called GPA’s overall performance “soft,” noting that its multivarejo division, with the Extra, Compre Bem and Pão de Açúcar brands, remains under pressure.

“Although we see a better trend for the company in the fourth quarter, both top line and margin-wise, given the brighter economic outlook, the recovery should be only gradual in its fundamentals,” they wrote in a report.

Estermann said GPA will accelerate supermarket conversions and store renovations in the coming months to meet growing consumer demand.

For the fourth quarter, GPA plans to renovate 20 Pão de Açúcar stores, and convert 18 supermarkets to Mercado Extra and 15 to Compre Bem, Estermann said.

The company is also building 14 new Assaí stores in 12 Brazilian states, of which 11 will be opened by December and three early next year. For 2020, GPA sees the potential to convert some hypermarkets to Assaí wholesale stores, he added.

“Especially in Sao Paulo, where some Assaí stores cannot be expanded, we consider a possible conversion of hypermarkets next year,” Estermann said. (Reporting by Gabriela Mello Editing by Chizu Nomiyama and Richard Chang)

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