São Paulo, April 26, 2018 - GPA [B3: PCAR4; NYSE: CBD] announces its results for the first quarter of 2018. Due to the ongoing divestment of the interest held by GPA in Via Varejo S.A., as announced in the material fact notice of November 23, 2016, the operations of Via Varejo are treated as discontinued operations. Accordingly, net sales and other profit or loss accounts were adjusted retrospectively, as required under IFRS 5/CPC 31, approved by CVM Resolution 598/09 – Non-current assets held for sale and discontinued operations. The following statements are related to the results of continuing operations. All comparisons are with the same period of 2017, except where stated otherwise.

1Q18 RESULTS

GPA Food:

▪        Total gross sales amounted to R$12.3 billion, up 7.6% (2.8% on same-store basis excluding calendar effect), driven by robust growth of 25% at Assaí

▪        Strong improvement in adjusted EBITDA to R$591 million (+17.4%), with margin expanding from 4.8% to 5.2%

▪        Net income from continuing operations attributable to controlling shareholders of R$153 million (+47.7%)

Assaí:

▪       Gross sales advance 25.0% to R$5.5 billion. Same-store growth excluding the calendar effect was 9.9% (5.1% excluding conversions), with growth of 12% in clients and 8% in sales volume. As a result, market share expanded by 380 bps in the period;

▪       Gross margin stood at 15.4%, predominately due to the rapid maturation of the 33 stores opened in 2016 and 2017 and to the new tax framework, despite the negative effects from food deflation;

▪       Adjusted EBITDA margin stood at 4.8%, with strong expansion of 80 bps on last year;

▪       Net income strong growth of 51.6% to R$115 million, with net margin of 2.3%;

▪       Six months after the launch of the Passaí card, the portfolio has over 200,000 active cards and a monthly issuance rate of around 50,000 cards;

▪       In line with the organic growth plan, one store was inaugurated in Sergipe, seven are under construction and another two are under conversion. The banner operates 127 stores in 19 states.

Multivarejo:

▪       Total gross sales of R$6.8 billion. After a lackluster start of the quarter, March registered an important reversal in trend, with same-store sales growth of 11.8% (3.9% ex calendar effect);

▪       In early March, new commercial actions were implemented, with greater visibility of promotions, relaunch of the Collect & Win campaign and reinforcement of the loyalty program with the launch of “My Rewards” in the same app as “My Discount”;

▪       Selling, general and administrative expenses fell 4.9%, despite inflation (IPCA +2.8%), resulting in a dilution of 30 bps compared to 1Q17;

▪       Adjusted EBITDA amounted to R$347 million, with margin of 5.5%, expanding 30 bps from 1Q17.

Outlook:

Performance in 1Q18 was in line with our expectations. We reaffirm our guidance for 2018:

▪       Same-store sales growth: Above inflation at Assaí and in line with food inflation at Multivarejo, supporting continued market share gains;

▪       Adjusted EBITDA margin: 5.5%-5.6% at Multivarejo and 5.8%-5.9% at Assaí;

▪       Financial result: around 1% of net sales.

“The results were by the solid performance of Assaí and an important reversal in trend in Multivarejo performance throughout 1Q18. Also in this quarter we recover the leadership position in Brazil food retail segment, as result of assertive strategic decision made few years ago to focus in cash-and-carry segment. We are confident that the consolidation of this leadership position in Brazilian retail will happen with the continuity of Assai growth jointly with the strategic work focused on operational improvements that we are promoting in Multivarejo.”

Ronaldo Iabrudi - CEO of GPA

 ⁽¹⁾ Sums and percentages may present discrepancies due to rounding. All margins were calculated as a percentage of net sales. ⁽²⁾ Earnings before interest, tax, depreciation and amortization. ⁽³⁾ EBITDA adjusted by Other Operating Income and Expenses.

In compliance with CPC 47 / IFRS 15, the Company reclassified the bonuses received from suppliers from the SG&A to the cost of sales, with no impact on EBITDA. The effect is retrospective to January 1, 2017. A reconciliation with the respective adjustments to 1Q17 and 1Q18 follows:

Effects from IFRS 15 on Gross Profit and Operating Expenses:

OPERATING PERFORMANCE BY BUSINESS

Assaí

Gross sales came to R$5.5 billion, advancing 25.0%. The improvement of R$1 billion in sales was driven by the opening of 20 stores and by same-store sales growth excluding the calendar effect of 9.9% (5.1% excluding conversions). The banner posted growth in same-store sales volume and customer traffic of 8% and 12%, respectively, supporting a market share gain of 380 bps, according to Nielsen.

Gross profit came to R$777 million in the quarter. Gross margin stood at 15.4%, advancing 90 bps on 1Q17. Growth was driven by the following factors:

• Successful expansion in 2016 and 2017:
  • 16 organic stores with accelerated maturation, demonstrating the format’s acceptance in the market;
  • Positive effect from 17 conversions with higher share of individuals;
• New tax framework, especially with regard to ICMS ST;
• Negative effect from the current scenario marked by food deflation.

Selling, general and administrative expenses amounted to 10.6% of net sales, stable in relation to prior-year period, due to the efficiency of mature stores (prior to 2016/17), but affected by the strong pace of expansion and deflation.

Adjusted EBITDA amounted to R$244 million, with margin expanding 80 bps to 4.8%, due to the gross margin expansion explained above.

Net income amounted to R$115 million, with net margin of 2.3%, representing strong growth of 51.6% on 1Q17.

Multivarejo

Total gross sales amounted to R$6.8 billion, affected by food deflation and the closure of Extra Hiper stores converted into Assaí stores. On a same-store basis, gross sales advanced 0.7% (-2.0% excluding the calendar effect).

After the adjustments implemented to the commercial policy in March and the normalization of operations at the DC in Osasco, São Paulo, a good trend in same-store gross revenue was observed in the formats Extra Hiper, which grew 15.3% (4.6% ex calendar effect), and Pão de Açúcar, which advanced 11.0% (3.3% ex calendar effect).

Gross Profit came to R$1,770 million, with gross margin of 28.2%, stable in relation to 1Q17.

Selling, general and administrative expenses decreased 4.9% compared to 1Q17, supported primarily by the 4.6% decrease in selling expenses, due to:

§  Productivity gains arising from the actions implemented last year and the employee multi-role program;

§  Effect from the closure of Extra Hiper stores to convert them into Assaí stores.

Adjusted EBITDA amounted to R$347 million, with margin of 5.5%, expanding 30 bps from 1Q17, mainly due to the greater dilution of expenses. The effects from the fire at the DC were reimbursed by the insurance company, which made a contribution of around 10 bps to the margin.

FINANCIAL PERFORMANCE

Other Income and Expenses

Other Operating Income and Expenses amounted to R$43 million, R$41 million of which at Multivarejo, related primarily to:

▪          Increase in provision for tax contingencies (ICMS SP) related to procedural progress throughout the quarter, in the amount of R$21 million;   

▪          Restructuring expenses of R$10 million;

▪          Other positive and negative impacts, including the write-off of property, plant and equipment, in the aggregate amount of R$10 million.

Financial Result

The Company’s financial result amounted to R$132 million, or 1.2% of net sales, improving 50 bps from 1Q17. This reduction of 27.7% is mainly explained by:

§  Decrease in debt cost: in line with the decline in the CDI rate, which fell from 12.7% in 1Q17 to 6.7% in 1Q18;

§  Improvement in the cost of receivables discount: the reduction was below the variation in the CDI rate due to the higher volume discounted;

§  Change in contingency and other expenses: increase mainly related to the positive effects of inflation adjustments of tax contingencies that favored 1Q17, with no cash impact.

Net Income

Net income attributable to controlling shareholders, the base for dividend payments, amounted to R$150 million, with margin of 1.3%.

In the food segment, net income attributable to controlling shareholders considering continuing operations amounted to R$153 million, up 47.7% on 1Q17, mainly due to the strong growth at Assaí.

Earnings per Share

Net income was R$0.52659 per common share and R$0.57786 per preferred share in the quarter.

Net Debt

Net debt, adjusted for the balance of not discounted receivables, stood at R$3,121 million. The Company continues to hold a low level of leverage that continues to improve, with its Net debt/EBITDA ratio decreasing from -1.54x to -1.35x in 1Q18.

The Company’s cash balance stood at R$1,701 million and its balance of not discounted receivables stood at R$641 million, for total available resources of R$2.3 billion. The Company also has approximately R$1.1 billion in pre-approved/confirmed credit facilities.

Investments

The Group’s investments amounted to R$330 million in 1Q18, up 23% on 1Q17, reflecting the expansion at Assaí and the renovations of Pão de Açúcar stores.

In the quarter, one new Assaí store was inaugurated in Itabaiana, Sergipe. In addition, four Extra Hiper stores were closed for conversion into Assaí stores, as well as four Extra drugstores, one Extra Super and one gas station.

Dividends

At the meeting of the Board of Directors held on April 26, 2018, it was approved the interim compensation to shareholders in the form of Interest on Equity related to 1Q18, which will be attributed to the mandatory dividend for the year 2018. The gross amount will total R$74.9 million, corresponding to R$ 0.2910893309 for each preferred share and R$ 0.2646266644 for each common share, deducted the amount related to withhold taxes (“IRRF” - “Imposto de Renda Retido na Fonte”), pursuant to the Law, with the exception of the shareholders who are immune and/or exempt.

The shares payment traded on B3 will be made on June 12, 2018, according to the base date of May 3, 2018. The shares issued by the Company will be traded ex-interest as from May 4, 2018. Regarding ADRs traded on the NYSE, holders will be entitled to the Interest on Equity on the base date of May 8, 2018 and the payment will be done by de Custodian bank JPMorgan Chase.

1Q18 Results Conference Call and Webcast

Friday, April 27, 2018
10:30 a.m. (Brasília) | 9:30 a.m. (New York) | 2:30 p.m. (London)

Conference call in Portuguese (original language)
+55 (11) 3193-1001 or (11) 2820-4001

Conference call in English (simultaneous translation)
+1 (646) 828-8246

Webcast: http://www.gpari.com.br

Replay
+55 (11) 3193-1012 or +55 (11) 2820-4012
Access code for audio in Portuguese: 179994#
Access code for audio in English: 378980#

http://www.gpari.com.br

Investor Relations Contacts

About GPA: GPA is Brazil’s largest retailer, with a distribution network comprising over 2.000 points of sale as well as electronic channels. Established in 1948 in São Paulo, it has its head office in the city and operations in 18 Brazilian states and the Federal District. With a strategy of focusing its decisions on customers and better serving them based on their consumer profile in the wide variety of shopping experiences it offers, GPA adopts a multi-business and multi-channel platform consisting of brick-and-mortar stores and e-commerce operations, divided into three business units: Multivarejo, which operates the supermarket, hypermarket and Minimercado store formats, as well as fuel stations and drugstores under the Pão de Açúcar and Extra banners; Assaí, which operates in the cash-and-carry wholesale segment; GPA Malls, responsible for the management of property assets, expansion projects and inauguration of new stores; and Via Varejo’s discontinued operations, with its bricks and mortar electronics and home appliances stores under the Casas Bahia and Pontofrio banners, and the e-commerce segment. 

Disclaimer: Statements contained in this release relating to the business outlook of the Company, projections of operating/financial results, growth prospects of the Company and market and macroeconomic estimates are merely forecasts and are based on the beliefs, plans and expectations of Management in relation to the Company’s future. These expectations are highly dependent on changes in the market, Brazil’s general economic performance, the industry and international markets, and hence are subject to change.

Glossary

Food Segment: Represents the combined results of Multivarejo and Assaí, excluding equity income (loss) from Cdiscount, which is not included in the operating segments reported by the Company. It includes retail and wholesale activities of products in general, including - but not limited to - food products, clothing, hygiene, medicines, fuels, furniture, consumer electronics and domestic utilities. Such activities are carried out both in physical and virtual establishments.

Discontinued Activities: Due to the ongoing divestment of the interest held by GPA in Via Varejo S.A., the operations of Via Varejo are treated as discontinued operations. Accordingly, net sales and other profit or loss accounts were adjusted retrospectively, as required under IFRS 5/CPC 31, approved by CVM Resolution 598/09 – Non-current assets held for sale and discontinued operations.

Growth and Changes: The growth and changes presented in this document refer to variations from the same period last year, except where stated otherwise.

EBITDA: EBITDA is calculated in accordance with Instruction 527 issued by the Securities and Exchange Commission of Brazil (CVM) on October 4, 2012.

Adjusted EBITDA: Measure of profitability calculated by excluding Other Operating Income and Expenses from EBITDA. Management uses this measure in its analyses as it believes it eliminates nonrecurring expenses and revenues and other nonrecurring items that could compromise the comparability and analysis of results.

Earnings per share: Basic earnings per share are calculated based on the weighted average number of outstanding shares of each category during the year, and treasury shares.

CONSOLIDATED FINANCIAL STATEMENTS

1. Balance Sheet

2. Income Statement - 1Q18

 (1)  Multivarejo includes the results of Malls and Corporate.
(2) Equity income from Cdiscount is included in the Consolidated results and not in the Retail and Cash-and-Carry segments.
(3) Net income after non-controlling interest.
(4) EBITDA adjusted by the line “Other Operating Income and Expenses” to eliminate nonrecurring income and expenses.

3. Financial income and expenses

In the financial statements of GPA as of March 31, 2018, due to the ongoing divestment of the interest held by GPA in Via Varejo S.A. as announced in the material fact notice of November 23, 2016, the operations of Via Varejo are treated as discontinued operations. Accordingly, net sales and other profit and loss accounts were adjusted retrospectively, as required under IFRS 5/CPC 31, approved by CVM Resolution 598/09 – Sale of non-current assets and discontinued operations.

4. Net Income

In the financial statements of GPA as of March 31, 2018, due to the ongoing divestment of the interest held by GPA in Via Varejo S.A. as announced in the material fact notice of November 23, 2016, the operations of Via Varejo are treated as discontinued operations. Accordingly, net sales and other profit and loss accounts were adjusted retrospectively, as required under IFRS 5 / CPC 31, approved by CVM Resolution 598/09 - Sale of non-current assets and discontinued operations.

5. Indebtedness

In the financial statements of GPA as of March 31, 2018, due to the ongoing divestment of the interest held by GPA in Via Varejo S.A. as announced in the material fact notice of November 23, 2016, the operations of Via Varejo are treated as discontinued operations. Accordingly, net sales and other profit and loss accounts were adjusted retrospectively, as required under IFRS 5 / CPC 31, approved by CVM Resolution 598/09 - Sale of non-current assets and discontinued operations. However, said technical standard does not require restatement of the balance sheet in such situations.

 ⁽¹⁾ EBITDA in the last 12 months.

6. Cash Flow - Consolidated (including Via Varejo)