Brazil's largest retailer plans to open hundreds of new stores(70262)

Brazil retailer CBD to invest $2.8B to 2010

Brazil's largest retailer Companhia Brasileira de Distribuicao (CBD, PCAR5.BR) said Wednesday it will invest 5 billion Brazilian reals ($2.8 billion) over the next few years, mostly to open 300 new stores.

CBD also suggested in a Wednesday announcement that its 2009 shopping spree may be extended, as it continues to look at acquisition options.

The bulk of its three-year investment budget, which is 70% larger than that spent in 2007-2009, will go into the opening of 300 new stores, it said in a statement.

"We are looking to take advantage of the acceleration of the Brazilian economy by growing faster," CBD's chief operations officer Eneas Pestana told journalists in Sao Paulo.

Brazil's economy weathered the global 2008-2009 slump better than most, which in large part was due to the strength of internal demand in Latin America's biggest country, home of nearly 200 million consumers. Formal employment and wages are expected to continue rising in 2010, fueling further growth.

A recent central-bank survey of analysts predicted the economy will grow 5.3% this year.

CBD clearly aims to capitalize on that growth. Its retail empire, with a current market value of approximately $9 billion, was built on its Pao de Acucar grocery business.

However, its household goods business grew dramatically in 2009 with the purchase of home appliance specialist Ponto Frio in an BRL825 million deal, and with the acquisition of household goods giant Casas Bahia in a stock swap agreement. Now home and electronics is actually bigger than its grocery segment.

Pestana said that the company has a specialist team devoted to scoping acquisition opportunities and other, probably smaller, purchases could be made this year.

"Now we have come out the other side of the [global economic] crisis, there are many retailers that are willing to talk," he said. "We have very low leverage, which gives us scope for further acquisitions."

He said the company is interested in expanding its chains of drug store and gas stations as it has identified this as a strategic area that sits well with its hypermarket and convenience store operations.

"We view ourselves as an all-around retailer and will go into any area that we see adding value," the executive said.

The investment plan doesn't include a budget for acquisitions, although some of the investment may be replaced by acquisitions, Pestana said.

The 2010-2012 investment budget also doesn't include the Ponto Frio or Casas Bahia operations, as the company is yet to acquire antitrust approval for the Casas Bahia purchase and it is still studying how to merge the two operations.

In 2010, the company plans to open 100 stores to add to its existing 1,080 stores, 79 petrol stations and 150 drug stores. The recent deal with Casas Bahia will give the company another 508 points of sale.

Brazil's largest retailer plans to open hundreds of new stores

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