Assaí driving solid Q3 sales performance for GPA

Date : 21 October 2019

GPA has reported gross sales of BRL$14.6bn (US$3.5bn), representing strong growth of 9.5% in Q3. This is despite a 2.4 pp drop in inflation versus the first half of the year. Like-for-like sales were flat for its hypermarkets and supermarkets, but up 3% for the Assaí (cash and carry) format.

Total sales for Assaí banner up 19% year-on-year

Gross revenue for the Assaí banner reached BRL$7.6bn (US$1.8bn), a significant 18.9% (BRL$1.2bn (US$290m)) increase versus Q3 2018. This strong performance was driven by 19 new openings in the last 12 months and an increased number of customers. Same-store-sales for the banner were up 3.2% and the stores that were opened in 2018 are said to be performing very well.

Assaí store openings in line with expectations

GPA opened five new Assaí stores in Q3, taking their total openings to nine so far this year. In said it will open at least 10 stores in Q4, in line with its plans to open 20 stores in 2019. Six stores are currently under construction and set to open in 2020, so we anticipate a similar number of openings from next year.

Total sales flat for core estate…

Total sales for GPA's core estate (all non-cash and carry banners) were broadly flat at 0.3%. GPA said the slowdown was caused by decelerating food inflation as well as the difficult economic environment in the country.

…but latest store concepts are performing very well

Pão de Açúcar

To date, GPA has remodelled 28 of its Pão de Açúcar supermarkets to its latest G6 and G7 design concepts, two of which were opened in Q3. As a result of these remodels, same-store sales at these stores have increased by 12%. GPA said it will renovate a further 20 stores to these designs by the end of 2019. In Q3 the business also opened one new Pão de Açúcar store. It has nine stores under construction and plans to open all of these in Q4.

Mercado Extra and Compre Bem

GPA has been converting stores in its underperforming Extra Super banner to its latest supermarket banners Compre Bem and Mercado Extra (both launched in 2018). In Q3, 39 were converted to Mercado Extra, totalling 82 in this banner, and 10 to Compre Bem. Sales in Mercado Extra stores grew by 7%, despite strong comparative like-for-likes of 24.9% in Q3 2018. Sales at Compre Bem have grown by more than 30% versus the previous banner.

In Q4 GPA plans to convert a further 20 stores to Mercado Extra and 15 to Compre Bem. If it achieves these numbers, this will equate to roughly 70% of the Extra Super portfolio converted. It aims to convert all these stores in the future.

Peter Estermann, GPA’s CEO said that Q3 “was marked by the evolution of our strategy of expanding and adapting our formats, which reflects in a store portfolio that is more adherent to the consumer scenario and prepared to capture the movements of the economy.”

Proximity stores see fifth consecutive quarter of double-digit sales growth

Sales for GPA’s proximity formats (Minuto Pão de Açúcar and Mini Mercado Extra) saw their fifth consecutive quarter of double-digit growth, reaching 17.5% in Q3. It said this was driven by assortment reviews and increased private label penetration. One new Minuto Pão de Açúcar opened in Q3.

Digital Transformation strategy having positive effect on sales growth

Food- ecommerce sales have grown by more than 30%, which it said is predominantly due to the expansion of its delivery initiatives. Online delivery methods ‘Express’ and ‘Click and Retire’ are now present in 113 of its Pão de Açúcar and Extra banners (combined), with 107 of these stores offering both services. It plans to extend this to 120 stores by year end.

GPA’s James Delivery last-mile delivery service is now offered in 35 stores across 12 cities. In stores where this is offered, online orders made using James Delivery represent 50% of total online orders. We expect GPA to continue to rapidly expand this service to compete with Rappi.

More customers utilising loyalty programmes and apps

Over 20m customers are now enrolled in GPA’s loyalty programmes, which is up 17% year-on-year. The business accumulated 10m downloads across its Pão de Açúcar Mais and Club Extra apps. It said that customers utilising the apps’ ‘My Discount’ feature, have a larger average ticket overall, so app usage is helping to drive additional sales.

Advances in till technology  

GPA has installed self-checkout tills in two stores, and these are being used by 25% of customers. This is a high adoption rate of customers opting to use these tills, which could encourage further roll-out, particularly in busy, high-footfall locations.

Pre-scanning, where employees scan customers’ products whilst they queue at the checkout, is already being used by 10% of customers in stores where the service is available. Similarly, in stores using Scan & Go technology, 15% of sales are made through it.

Steady growth of private label penetration

In GPA’s 2018 annual report, it announced plans to increase private label sales penetration from 10% to 20% over three years. In Q3 2019 exclusive brands reached 12.7% of sales (in food categories). The latest product categories it has grown its own label are specialty beers, sodas, fermented milk and dairy desserts. The business aims to launch around 500 new products in 2019.

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