GPA has reported gross revenues of BRL$14.2bn (US$3.7bn) for Q2, an 11.3% year-on-year (YOY) increase. This is despite comparative like-for-like performances being affected by a slower recovery of the economy and a particularly strong comparative sales performance in 2018 as a result of the football world cup.
Assaí accounts for over 50% of gross sales
In Q2 gross sales for GPA’s Assaí cash and carry banner were up by 24.4%, totalling BRL$7.1bn (US$1.9bn). In the quarter sales for the banner accounted for 50.2% of gross sales across all its formats. This was driven by a strong same-store-sales performance of 8.1% and three new store openings. 12 Assaí stores are currently under construction and the business is on track with its 2019 target of 20 openings.
“Assaí once again confirmed the sustainability of the format. The performance was mainly marked by the successful organic expansion, resulting in accelerated sales growth and increased profitability”. Peter Estermann - Chief Executive Officer of GPA.
Between 2013 and June 2019 GPA opened 73 Assaí stores and expanded into seven new states (19 total). Across the same period, according to GPA Assaí grew market share by around 60% from 18.5% to 29% and we expect a similar trajectory in the medium term.
Core estate shows growth despite strong comparison base
Gross revenue for GPA’s Multivarejo (core estate) grew by 0.6%, compared to 5.3% in Q2 2018. Its sales performance was adversely affected by the strong comparison in Q2 2018. This was predominantly because of 2018’s football world cup, but also due to Brazil’s slower than expected economic recovery, which has led to a more cautious consumption environment.
Optimising store portfolio is driving a positive sales growth
In the quarter GPA converted 13 Extra Super stores to its Mercado Extra banner. So far 43 Extra Supers have been converted to the Mercado Extra banner and 13 have been converted to Compre Bem. As a result, the new banners are delivering double-digit growth, both in terms of sales and customer numbers. GPA will continue to convert Extra Super stores, aiming for at least 80 stores by the end of 2019.
Source: IGD Retail Analysis
The business has also remodelled 26 stores under its Pão de Açúcar banner to its latest G6 and G7 store designs. The updated stores are significantly outperforming the average sales of the overall banner. GPA aims to renovate a further 20 stores to the G7 model by the end of 2019.
“The result of store renovations and conversions contributed to the consistent improvement in sales, which posted double-digit growth in line with the portfolio adjustment goals”. Peter Estermann
Strong progression in food ecommerce and digital transformation
GPA remains the ecommerce market leader in Brazil. In Q2 it made several advances to its digital transformation strategy, which supported its strong 37% growth in ecommerce food sales. The business has expanded its express delivery and click and collect models to cover a total of 94 Pão de Açúcar and Extra stores, and it aims to make this available in 120 stores by the end of 2019.
In Q2 2019 sales made through GPA’s James Delivery last mile app were 4.7 times higher than the previous quarter and coverage was extended to the cities of Santos and Fortaleza. The number of orders is 75% higher than its previous last-mile operating model and before acquiring the James Delivery business. GPA has ambitious plans to expand the service, which is currently limited to 20 stores across four cities, to cover 25 cities by 2020.
GPA now has 19.3m customers using its loyalty programmes, with 85% penetration in Pão de Açúcar and 60% in Extra Hiper. Its My Discount app has had over 9.3m downloads, with a 58% increase in downloads in Q2 2019 versus the same quarter in 2018.
Solid progress in growing private label
In its 2018 full year results GPA announced plans to increase private label sales penetration from 10% to 20% over three years. As of Q2 2019, it has grown private label sales to 12.1%, which it said was due to the repositioning of its private label portfolio and the launch of many new products. The business aims to launch around 500 new products in 2019.
Chef and econo bom private labels integrated in an Assaí store
Source: IGD Retail Analysis
We visited one of GPA's latest stores which has been remodelled to its new G7 concept. One of 20 stores opened in this format in 2018, the store has a new layout and product mix which focuses on fresh and healthy categories.
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