São Paulo, Brazil, May 12, 2011 – Grupo Pão de Açúcar (BM&FBOVESPA: PCAR5; NYSE: CBD) announces its results for the 1^st quarter of 2011 (1Q11). The Company’s operating and financial information was prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), the accounting practices adopted in Brazil (BRGAAP) and Brazilian Corporate Law, and is presented in Brazilian Reais, as follows: (i) on “GPA Food” basis, which entirely excludes the operating and financial results of Globex Utilidades S.A. (including Nova Casas Bahia and Nova Pontocom, (ii) on “GPA consolidated” basis, which includes the full operating and financial results of Globex Utilidades S.A., and, as of November 2010, Nova Casas Bahia. All comparisons are with the same periods in 2010 (1Q10), except where indicated otherwise.

GPA FOOD

CONSOLIDATED

Same-store concept – includes only those stores that have been operational for at least 12 months.  

(1) Totals may not tally as the figures are rounded off.
(2) basis points
(3) Includes Nova Casas Bahia

Sales Performance

 GPA Food’s gross same-store terms sales

increased by 8.4% in the first four months of 2011  

GPA FOOD  

It is worth noting that, particularly in the case of GPA Food, the 1Q11 year-on-year sales comparison was jeopardized by the seasonal effect of Easter. In 2010, Easter fell at the beginning of April (April 4), benefiting March’s sales; in 2011, however, it fell at the end of the month (April 24) benefiting April’s sales.

In order to show this tendency and neutralize the seasonal impact, we are also presenting (in this section only) the sales performance for the first four months of the year.

Also to ensure better comparability, the sales of Extra Eletro and Extra.com.br were removed from GPA Food and transferred to Globex in line with the Company’s new reporting structure.

In the first quarter of 2011, GPA Food recorded gross and net sales of R$6,640.2 million and R$5,984.4 million, respectively.

It is worth noting that excluding Extra Eletro and Extra.com.br, as mentioned above, gross and net sales would increase by 9.7% over 1Q10. Gross and net sales in the first four months totaled R$9,163.8 million and R$8,243.4 million, 12.6% and 12.5% up year-on-year, respectively.

In same-store terms, both gross and net sales increased by 5.7% year-on-year. Between January and April, gross sales climbed by 8.4% and net sales by 8.3%, respectively. In real terms, i.e. deflated by the IPCA consumer price index⁽²⁾,  gross sales moved up by 2.0%.

Also on a same-store basis, non-food sales climbed by 11.6% over 1Q10, led by electronics/household appliances and textiles, while food sales grew by 3.6%. In 4M11, food and non-food sales moved up by 6.9% and 14.4%, respectively.

The Group’s best-performing formats in the 4M11 were Extra Supermercado and Assaí, which posted gross same-store sales growth above the Group’s format’s average.

CONSOLIDATED

In the first quarter, GPA’s gross sales, comprising all the Group’s formats and businesses, increased by 58.9% over the same period last year to R$12,373.2 million, while net sales climbed by 55.9% to R$10,868.8 million. Excluding Casas Bahia, gross and net sales totaled R$8,704.8 million and R$7,806.1 million, respectively, 11.8% and 11.9% up on 1Q10.

In same-store terms (i.e. stores that have been operational for at least 12 months, therefore excluding the Casas Bahia stores), gross and net sales grew by 6.8%.

It is worth noting that all comparisons are impacted by the consolidation of Casas Bahia in the 1Q11, non-existent in the 1Q10.  

  ⁽²⁾ Like ABRAS (the Brazilian Supermarket Association), the Company has adopted the IPCA consumer price Index as its inflation indicator, since it gives a more accurate reflection of the Company’s product and brand mix. The 12-month IPCA used was 6.51%.

Gross Profit

GPA Food gross margin widened by 110 bps over 1Q10

GPA FOOD

In the first quarter, GPA Food gross profit totaled R$1,536.8 million, 9.3% up year-on-year, accompanied by a gross margin of 25.7%, 110 bps more than in 1Q10. This result was obtained despite the greater contribution from Assaí (13.9% of gross sales, versus 10.6% in 1Q10), which operates with lower margins. Excluding Assaí, GPA’s gross margin would have come to 27.6%, 180 bps higher than the 25.8% recorded in 1Q10.

The main factors contributing to the year-on-year improvement were:

(i)                       the improved product mix, with a higher share of perishables and general merchandise, whose margins are higher;

(ii)                      more advantageous negotiations with suppliers;

(iii)                    improved operational and sales management; and

(iv)                    implementation of a pricing management tool.

CONSOLIDATED  

(1) Nova Casas Bahia is included
(2) Nova Casas Bahia is not included

In the first quarter, consolidated gross profit came to R$2,848.4 million, with a gross margin of 26.2%, 220 bps more than the 24.0% recorded in 1Q10. In addition to the above-mentioned gains by GPA Food, this result was positively impacted by Globex, whose 1Q11 gross margin stood at 26.2%, 170 bps up on the 24.5% recorded in 4Q10, basically due to gains from negotiations with suppliers. It is worth noting that Globex’s gross profit was  impacted by a non-recurring R$ 8.4 million from the Ponto Frio stores, due to the adoption of a more appropriate mix and store assortment resulting in an adjusted margin of 23.3%.

It is worth noting that all comparisons are impacted by the consolidation of Casas Bahia in the 1Q11, non-existent in the 1Q10. 

Total Operating Expenses  

Total GPA Food operating expenses represented 18.5% of net sales in the quarter

GPA FOOD

In the first quarter, total operating expenses (including selling, general and administrative expenses) came to R$1,105.6 million, equivalent to 18.5% of net sales:

(i)        the impact of the greater dilution of expenses due to Easter seasonality, representing  around 40 basis points;

(ii)       appropriation of operational expense with outsourcing in the 1Q11 (classified as CAPEX in 2010), whose impact was equivalent to 30 bps; and;

(iii)     operating expense of newly opened stores equivalent to 20 bps.

CONSOLIDATED

In the first quarter, total consolidated operating expenses amounted to R$2,239.0 million, equivalent to 20.6% of net sales, 290 bps up on the 17.7% posted in 1Q10. It is worth noting that this comparison is not applicable considering the 3 months consolidation of Casas Bahia in Globex which operates with higher operational expense and was not consolidated in the 1Q10.

 EBITDA
GPA Food’s EBITDA margin stood at 7.2% in the first quarter, 20 bps more than in 1Q10

GPA FOOD

In the first quarter, GPA Food EBITDA totaled R$431.2 million, 7.7% up year-on-year, due to improved gross margin management, thanks to a more advantageous product mix, improved commercial management and the implementation of a pricing management tool.

The EBITDA margin stood at 7.2%, 20 bps more than the 7.0% posted in 1Q10.

CONSOLIDATED

     EBITDA

(1) Nova Casas Bahia is included
(2) Nova Casas Bahia is not included

In the first quarter, consolidated EBITDA totaled R$609.4 million, 40.5% up on 1Q10, with a margin of 5.6%, 60 bps down on the 6.2% posted in 1Q10. Excluding the non-recurring gross profit impact, adjusted EBITDA would come to R$ 617.8 million, 50 bps down compared to 1Q10.

It is worth noting that all comparisons are impacted by the consolidation of Casas Bahia in the 1Q11, non-existent in the 1Q10. 

Net Financial Result  

Financial result corresponded to 2.7% of 1Q11 net sales

GPA FOOD

In the first quarter, the Company recorded a net financial expense of R$161.7 million, equivalent to 2.7% of net sales, chiefly due to the period upturn in the SELIC base rate (see “Net Debt”) and to the restatement of other assets and liabilities.

The net financial expense of R$161.7 million in 1Q11 was the result of the following factors:

(i)        interest on the net bank debt totaling R$76.2 million, equivalent to 1.3% of net sales, the same level as in 4Q10 (1.2%);

(ii)       the cost of discounted receivables was R$47.8 million, equivalent to 0.8% of net sales, higher level than in 4Q10 due to the period upturn in the SELIC base rate.

(iii)     other assets and liabilities restated by the CDI rate totaling R$37.7 million, equivalent to 0.6% of net sales, a R$21.2 million variance on 4Q10, due to: (i) R$10 million derived from court deposits and taxes paid in installments; (ii) R$6.0 million reduction in assets charges and R$3.0 million reduction in liabilities charges.

Net Debt

The increase in net debt, shown in the graph below, was mainly due to: (i) seasonal effect of a R$375 million working capital need, and (ii) R$223.0 million in payments for the acquisitions.

(1) end of period

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GPA Food’s net debt is calculated as follows:

(1) ST = Short Term; LP = Long Term

CONSOLIDATED

(1) Nova Casas Bahia is included
(2) Nova Casas Bahia is not included
(3) Nova Casas Bahia is included only in November and December

In the first quarter, GPA posted a consolidated net financial expense of R$325.7 million, equivalent to 3.0% of net sales. In addition to the GPA Food upturn, explained above, part of this increase was due to Globex’s higher financial expense as a percentage of sales, essentially due to the nature of its business.

It is worth noting that all comparisons are impacted by the consolidation of Casas Bahia in the 1Q11, non-existent in the 1Q10. 

Equity Income

FIC’s result (in equity income) came to R$10.5 million in the quarter

CONSOLIDATED

In the first quarter, FIC (Financeira Itaú CBD), including Globex’s operations, accounted for 12.1% of total sales, closing the period with 8.2 million clients. Default remained under control, thanks to a rigorous credit-granting policy.

As a result, FIC’s equity income came to R$10.5 million in the quarter, R$7.5 million of which went to GPA and R$3.0 million to Globex.

This performance was in line with the Group’s strategy of increasing the FIC card’s share of sales, making it the best payment option in the stores and e-commerce operations, with exclusive benefits and advantages for card-holders.

Only for comparison purposes, the adjusted result was R$ 9.8 million. 

Net Income

GPA Food’s net income totaled R$135.6 million in 1Q11

GPA FOOD

In the first quarter, net income came to R$135.6 million, with a net margin of 2.3% in the quarter. Two adjustments are needed for net income comparison:  intangible amortization expense in the amount of R$ 30.0 million resulted from the association with Nova Casas Bahia and IFRS adjustment in equity income in the amount of R$ 12.0 million. Excluding such effects, the net income would have come to R$ 155.4 million with margin of 2.6% in the 1Q11, a reduction of 5.4% compared to 1Q10. This reduction was primarily due to the increase in the financial expenses, explained in the financial result section. 

CONSOLIDATED

(1) Nova Casas Bahia is included
(2) Nova Casas Bahia is not included

In the first quarter, consolidated net income totaled R$110.8 million, with a net margin of 1.0%. It is worth noting that this result was impacted by those effects explained in the GPA Food net income section, besides the two non-recurring items: R$ 8.4 million from gross profit and R$ 6.8 million in expenses from the restructuring of Globex, recognized in the other operating expenses line. Excluding these effects net of taxes, net income would have come to R$ 140.7 million, with a margin of 1.3%.

It is worth noting that all comparisons are impacted by the consolidation of Casas Bahia in the 1Q11, non-existent in the 1Q10. 

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Assaí Atacadista

Gross sales totaled R$ 910.3 million in 1Q11,

35.1% up on 1Q10

In the first quarter, Assaí posted gross sales of R$ 910.3 million, including the stores in São Paulo, Ceará, Rio de Janeiro, Pernambuco and Tocantins, 35.1% up on 1Q10, fueled by organic growth, the conversion of existing stores and the format’s improved operating result. Net sales also grew by 35.1%, accompanying gross sales.

Globex Utilidades S.A.

Same-store gross sales moved up 10.9% in the quarter

In the first quarter, Globex recorded consolidated gross sales increased by 297.4% over 1Q10 to R$5,733.0 million, while net sales climbed by 288.4% to R$4,884.4 million. Same-store gross sales moved up by 10.9% (for more details see Globex’s release).

Investments

GPA Food invested R$263.2 million in 1Q11

GPA FOOD

In the first quarter, GPA Food invested R$263.2 million, versus R$207.0 million in 1Q10, allocated as follows:

·         R$78.9 million to the opening and construction of new stores and the acquisition of strategic sites;

·         R$136.1 million to store renovations and conversions;

·         R$48.2 million to infrastructure (technology and logistics) and others.

Three new stores were opened in the quarter:

·           two Assaí stores and 1 Extra Fácil store in São Paulo.

In addition, there were 23 conversions:

·         19 CompreBem stores in São Paulo, 17 of which converted into the Extra Supermercado format and two into the Extra Hipermercado format;

·         4 Sendas stores in Rio de Janeiro, two of which were converted into the Pão de Açúcar format and two into the Extra Hipermercado format. 

CONSOLIDATED

Consolidated investments totaled R$295.8 million, R$ 32.0 million operating which went to Globex.

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Dividends
R$22.5 million to be paid as dividends in the quarter

On May 11, 2011, the Board of Directors approved the prepayment of interim dividends totaling R$22.5 million in accordance with the Company’s Dividend Payment Policy, approved by the Board of Directors’ Meeting of August 3, 2009, equivalent to R$0.09 per preferred share and R$ 0.081818181818 per common share.

As for the fourth quarter, after the end of the fiscal year and the approval of the corresponding financial statements, the Company will pay shareholders the minimum mandatory dividends, calculated in accordance with Corporate Law, less the amounts prepaid throughout 2010.

Dividends in relation to the first quarter of 2011 will be paid on May 27, 2011. Shareholders registered as such on May 19, 2011 will be entitled to receive the payment. As of May 20, 2011, shares will be traded ex-dividends until the payment date.

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GPA FOOD

CONSOLIDATED

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