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UPDATE 1-Brazil retailer GPA profit slips on tax burden
February 12, 2015 / 11:18 PM / 3 years ago

UPDATE 1-Brazil retailer GPA profit slips on tax burden

(Adds details of earnings)

SAO PAULO, Feb 12 (Reuters) - Brazil’s biggest retailer, GPA SA, posted a slightly lower fourth-quarter profit as a larger tax burden offset more profitable operations, according to a Thursday filing.

Net income slipped 2 percent from a year earlier to 673 million reais ($239 million), beating an average forecast of 635 million reais in a Reuters poll of analysts.

GPA counted on fatter gross profit margins at supermarkets and appliance stores to boost operating profit despite weak sales. The retailer reported last month that sales rose around 1 percent at brick-and-mortar stores open for a year or more.

Last Christmas was the weakest in a decade for retailers as higher interest rates, stiff inflation and weak job growth hurt household demand.

Still, GPA’s gross margin, or sales minus the cost of goods, rose by 4.2 percentage points at home furnishings and appliance division Via Varejo SA and by 2.4 percentage points at retail food stores.

The bump in profitability signals GPA is backing off the aggressive pricing strategy of recent years, in which it drove sales growth by sacrificing gross margins.

Earnings before interest, taxes, depreciation and amortization rose 24 percent to 1.622 billion reais, but missed an average forecast of 1.854 billion reais.

The company booked 331 million reais of extraordinary expenses in the fourth quarter, related to tax credits, corporate restructuring, the listing of online unit Cnova and other reasons the company did not specify.

Those one-time effects also increased GPA’s income tax bill, which more than tripled from a year ago to 259 million reais.

$1 = 2.82 reais Reporting by Brad Haynes; Additional reporting by Luciana Bruno in Rio de Janeiro; Editing by Leslie Adler

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