• Gross Sales: BRL30.5 billion in Q2 2024, up 4.9% year-over-year.
• Gross Margin: 18.7%, a decrease of 100 basis points from Q2 2023.
• Adjusted EBITDA: BRL1.6 billion with a margin of 5.7%, an increase of 58 basis points year-over-year.
• Adjusted Net Profit: BRL151 million for the quarter.
• Same-Store Sales Growth (Atacadao): 7.4% year-over-year.
• Store Openings: 5 new Atacadao stores and 3 new Sam's Club stores added in the quarter.
• Sam's Club Revenue Growth: 16% year-over-year.
• Banco Carrefour Earnings Growth: 13% year-over-year.
• Cash Flow from Operations: BRL5.5 billion over the last 12 months.
• CapEx: BRL2.8 billion, BRL1.2 billion less than the same period last year.
• Net Debt: BRL15.3 billion, an increase of BRL2.2 billion from June 2023.

• Warning! GuruFocus has detected 9 Warning Signs with ATAAY.

Release Date: July 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Atacadao SA (ATAAY) reported a strong boost in sales across its business units with a significant recovery in volumes.
• The company increased its guidance for Atacadao store openings to 20 this year, including 8 additional supermarket stores being converted.
• Digital sales showed impressive growth, with GMV reaching BRL2.9 billion, up 41% year-over-year.
• Sam's Club delivered revenue growth of 16% with successful new store openings.
• The Carrefour bank performed strongly with a 13% increase in earnings compared to last year, and delinquency levels remained under control.

Negative Points

• The gross margin decreased by 100 basis points compared to Q2 2023 due to the increased participation of Atacadao, which has a narrower margin.
• Despite sales growth, the adjusted net profit was BRL151 million, not yet reflecting the benefits of lower interest rates renegotiated for intercompany loans.
• The company faced a decrease in retail sales by 11%, largely due to reduced sales square footage.
• SG&A expenses for Sam's Club increased by 31.6% year-over-year due to the accelerated pace of store openings.
• The new revolving credit regulation is expected to impact the bank's EBITDA by BRL150 million to BRL200 million in the second half of the year.

Q & A Highlights

Q: Could you elaborate on the main drivers behind the strong same-store sales growth for Atacadao and the impact of installment payments on working capital? A: Stephane Maquaire, CEO, explained that the strong performance was driven by initiatives to strengthen B2C strategies, including successful campaigns like the Atacadao anniversary and Merchant Week. The introduction of services such as Bakery, Butcher, and Deli in stores also contributed. Eric Alencar, CFO, added that the installment payment option, while impacting receivables, has been beneficial in increasing sales, especially in a market with many customers in arrears.

Q: There was a notable decrease in sales taxes this quarter. Can you explain the reasons behind this and what to expect moving forward? A: Eric Alencar, CFO, attributed the decrease to a new accounting rule for calculating PIS/Cofins and ICMF taxes, now assessed when merchandise is sold rather than when it arrives. This change, along with shifts in sales geographies, accounted for the impact. Moving forward, a 9% rate is expected.

Q: How is food inflation affecting your business, and what are your expectations for B2B sales in the coming quarters? A: Stephane Maquaire, CEO, noted that food inflation is stabilizing, with expectations for it to rise due to last year's deflation. B2B sales are expected to benefit from this trend, with opportunities for growth in the third quarter, similar to the second quarter's performance.

Q: Could you provide more details on the synergies from the BIG acquisition and any new sources of synergy identified? A: Stephane Maquaire, CEO, mentioned that the maturity of converted stores and IT system convergence are key areas for future synergies. The integration of the BIG Group continues to reveal new opportunities for operational streamlining and supplier negotiations.

Q: What are your expectations for SG&A in the coming quarters, and how are you managing cost-cutting initiatives? A: Stephane Maquaire, CEO, emphasized ongoing cost-cutting efforts, particularly in logistics and corporate areas, to streamline operations. Eric Alencar, CFO, added that the focus is on reducing SG&A to historical levels through operational leverage and efficiency improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.