São Paulo, Brazil, October 30, 2014 - GPA [BM&FBOVESPA: PCAR4 (PN); NYSE: CBD] announces its results for the third quarter of 2014. The comments refer to the consolidated results of the Group or of its business units.

Consolidated

Food Business (Multivarejo + Assaí)

Via Varejo

(1) Includes results of Cnova: Cnova Brasil + Cdiscount Group. For further details please refer to page 3. (2) Sums and percentages may present discrepancies due to rounding. All margins were calculated as a percentage of net revenues; (3) Includes revenue from the leasing of commercial galleries. Figures for prior periods were reclassified for comparison purposes. (4) Earnings before interest, tax, depreciation and amortization; (5 )Adjusted EBITDA by excluding the Other Operating Revenue (Expenses), thereby eliminating nonrecurring income, expenses and other nonrecurring items.     

Sales Performance

(1) Excludes revenue from intercompany transactions; (2) Pão de Açúcar and Extra banners, including revenue from the leasing of commercial galleries. Figures for prior periods were reclassified for comparison purposes. (3) Cnova: Cnova Brasil + Cdiscount Group. For Cdiscount, there was consolidation of sales in August and September only. Includes revenue from commissions in the marketplace, not considering merchandise volume; (4) Includes revenue from intercompany transactions; (5) Includes the food categories of Multivarejo and Assaí and excludes the non-food categories of Multivarejo; (6) Includes the non-food categories of Multivarejo, Cnova and Via Varejo.

Sales Performance – Consolidated

The multiformat structure, intra-group synergies and multi-channel initiatives have allowed the GPA to provide sales growth despite a more challenging scenario. In the Food segment, there was an increase of 6.2% and in the Non-Food which comprises Via Varejo and e-commerce there was a 17.0% growth.

Net sales amounted to R$15.7 billion, increasing 10.9%, driven by the 146 new stores opened in the last 12 months and the same-store sales growth of 3.0%. Excluding the effect of Cdiscount consolidation, for comparison purpose, total net sales would have grown by 5.7% in 3Q14. The quarter was impacted by the strong comparison base in 3Q13 which posted same store sales growth of 11.8% and by macroeconomic scenario, which mainly affected the performance of non-food categories.

The Company accelerated its organic growth in the quarter, mainly in the Assaí, Pão de Açúcar and convenience stores formats. In the quarter were inaugurated 50 new stores, bringing to 96 the total number of new stores opened in the year to date.

Performance by category:

ü Food: same-store sales growth of 2.3%, positively impacted by meat, poutry and beverage categories.,The strong comparison base in the previous year of 9.5% impacted the quarter performance;

ü Non-food: same-store sales increased 3.6%. The highlights were the smartphones and white line categories, which improved along the last months of the quarter.  The period was negatively affected by the anticipation of television sales in June due to World Cup. Additionally, it is important to highlight the strong comparison base of non-food category that posted 13.5% growth in the same quarter of the previous year.

Food Businesses (Multivarejo + Assaí)

ü Net sales grew 6.2%, with 35 new stores opened in the period, of which 33 were convenience stores (33 Minimercado Extra and 2 Minuto Pão de Açúcar) and 2 were Assaí stores. On a same-store basis, sales growth was 0.6%, mainly impacted by durable goods sales at hypermarkets;

ü At Multivarejo, the best-performing banners in the quarter were Pão de Açúcar and Minimercado Extra, continuing the trend observed in recent quarters. Private-label brands continued to register robust growth and maintained their contribution to sales at over 10%;

ü Assaí maintained its trend of strong gross sales growth (31.2%), driven by solid same-store sales performance and the significant contribution from new store openings. Two new stores were opened in the quarter, one of which was in a new state, bringing the total number of stores in the banner to 80 and expanding the banner's footprint to 50% of the country's states. A total of 11 stores were opened in the last 12 months. Assaí plans to accelerate its pace of expansion over the coming quarters. The new store openings will be concentrated in the Northeast, a region that already has 13 stores (over 15% of total stores).

Via Varejo

ü Net sales amounted to R$5.3 billion, increasing by 0.7% and by 0.2% on a same-store basis. Excluding the impact from the 32 stores closed in 2Q14 to comply with Brazil’s antitrust authority CADE, net sales growth on a total-store basis would be 2.3%;

ü Sales were impacted by the negative performance in July due to the shorter business hours at stores during the World Cup and by the slowdown in consumption in the weeks following the event;

ü Note that sales gradually recovered in August and especially in September, led by the smartphone and white line categories;

ü A total of 15 new stores were opened in the quarter, of which 11 were under the Casas Bahia banner and 4 under the Ponto Frio banner. Twenty-nine new stores were opened in the year to date and 55 were opened in the last 12 months.

Cnova

As announced on July 24, the corporate reorganization required for the implementation of the e-commerce Business Combination (Cnova) was completed. Cnova is indirectly owned by CBD, Via Varejo and certain founding shareholders of Nova Pontocom, which hold participation of 53.5%.

The following tables reflect the operation of Cnova in the third quarter of 2013 and 2014. It is important to mention that these figures differ from the table on page 1, which reflects the GPA vision: consolidation of Cdiscount into Cnova in August and September of 2014.

ü  The e-commerce segment, Cnova, is formed by the operations of Cnova Brasil and Cdiscount in France, including its specialized websites and international websites.

(1) GMV: Gross Merchandise Volume TTC (business volume, including direct sales, merchandise volume in the marketplace and other revenues, after returns, including taxes); (2) Proforma includes all the international websites of Cdiscount to reflect in advance the consolidation to be carried out in the fourth quarter of 2014; (3) Active customers at the end of September who made at least 1 purchase in the last 12 months; (4) Total orders placed by customers prior to cancelation due to fraud, payment incidents and cut-off; (5) Share of sales in the marketplace through the website www.cdiscount.com; (6) Share of sales in the marketplace through the website www.extra.com.br.

Operating Performance

(1) Includes leasing revenue from commercial galleries. Prior periods have been reclassified for comparative purposes; (2) EBITDA adjusted by Other Operating Income and Expenses to eliminate nonrecurring income and expenses.

The Company’s gross margin in the quarter contracted by 50 basis points, reflecting the higher contribution from Assaí and Cnova (*). 

Selling, general and administrative expenses as a percentage of net revenue fell 50 basis points, from 19.0% in 3Q13 to 18.5% in 3Q14, reflecting the efficiency gains and greater discipline in controlling expenses.   

EBITDA amounted to R$1.168 billion, increasing 12.7% from 3Q13, with EBITDA margin expanding 20 basis points. EBITDA adjusted by the line Other Operating Income and Expenses came to R$1.186 billion, with margin of 7.6%, driven by margin gains at Via Varejo, Multivarejo and Assaí.

In 9M14, EBITDA stood at R$3.308 billion, with EBITDA margin of 7.2%. EBITDA adjusted by the line Other Operating Income and Expenses came to R$3.418 billion, growing 18.6%, with margin expansion of 50 basis points.

(*) As mentioned on page 3, the reorganization required for implementing the Combination of the E-Commerce Businesses (Cnova) was concluded on July 24. Therefore, the consolidation of Cdiscount into GPA corresponds only to the months of August and September 2014.

All tables and commentary below include results of Cnova Consolidated, except where indicated. 

(1) Includes leasing revenue from commercial galleries. Prior periods have been reclassified for comparative purposes; (2) EBITDA adjusted by the line Other Operating Income and Expenses to eliminate nonrecurring income and expenses.

Commercial initiatives focused on price competitiveness remained a part of the strategy at Multivarejo in 3Q14. Among the factors that contributed to the gross margin expansion of 140 basis points include:

(i)   revenue growth at leasing of commercial galleries;

(ii)  increased participation of formats that operates with higher-margin (i.e. Pão de Açúcar and Minimercado Extra) in the sales mix of Multivarejo; and

(iii) lower share of non-food categories in total sales, reflecting the macroeconomic scenario.

Selling, general and administrative expenses came to R$1.274 billion, growing by 5.5% compared to 3Q13, which is below the rate of inflation in the last 12 months. For yet another quarter, the disciplined control of corporate and operating expenses supported continued reinvestment in price competitiveness, as mentioned above.

EBITDA amounted to R$522 million, with EBITDA margin expanding 50 basis points compared to 3Q13. EBITDA adjusted by the line Other Operating Income and Expenses came to R$537 million, with adjusted EBITDA margin expanding 40 basis points.

In 9M14, EBITDA amounted to R$1.495 billion, with EBITDA margin of 7.9%. Adjusted for the line Other Operating Income and Expenses, EBITDA amounted to R$1.602 billion, increasing 8.2% on the prior-year period to outpace revenue growth in the period. Adjusted EBITDA margin improved by 30 basis points from 9M13.

(1) EBITDA adjusted by the line Other Operating Income and Expenses to eliminate nonrecurring income and expenses.

Assaí maintained its pace of sales growth in the quarter, with net sales revenue advancing 31.2% to R$2.097 billion. This performance is explained by the result of the performance of the new stores which have exceeded expectations and the consistent same-store growth registered by the banner. A total of 11 stores were opened in the last 12 months. This quarter, Assaí reached a total of 80 stores and expanded its footprint to 50% of Brazilian states. The expansion plan will be intensified over the coming quarters.

Despite the significant expansion in stores, expenses as a ratio of net sales revenue have remained in line with last year. As a result, EBITDA reached R$71 million in the quarter, or 35.4% more than in 3Q13, and outpaced revenue growth in the period. EBITDA margin was 3.4%, expanding by 10 basis points from 3Q13.

In 9M14, EBITDA came to R$190 million, increasing 38.5% from 9M13. Adjusted for Other Operating Income and Expenses, EBITDA amounted to R$190 billion, increasing 39.7% on the prior-year period to outpace revenue growth in the period. Adjusted EBITDA margin improved by 10 basis points compared to 9M13.

(1)   Some numbers presented in this release differ from those in the Via Varejo release due to effects of intercompany transactions.

(2)   EBITDA adjusted by the line Other Operating Income and Expenses to eliminate nonrecurring income and expenses.

Gross margin expanded by 150 basis points, which is basically explained by (i) the ongoing productivity initiatives, such as capturing efficiency gains in logistics and assembly; (ii) the good performance of financial services and other services; and (iii) the favorable product mix, led by smartphones.

The plan to capture efficiency gains in expenses continued to be implemented in various areas of the company during the quarter. The highlights were the improvements in delivery logistics, higher efficiency gains in store processes and the streamlining of general expenses. These gains helped keep the increase in selling, general and administrative expenses in line with net sales revenue, mitigating the effects of higher costs driven by inflation. 

As a result, EBITDA amounted to R$529 million in the quarter, increasing 16.1% from 3Q13. Adjusted for the line Other Operating Income and Expenses, EBITDA amounted to R$544 million, increasing 19.9% on 3Q13, with this figure more accurately reflecting the Company's operating performance. Adjusted EBITDA margin stood at 10.3% in the quarter, expanding 170 basis points.

In 9M14, adjusted EBITDA amounted to R$1.541 billion, increasing 27.5% compared to 9M13. Adjusted EBITDA margin stood at 9.5%, expanding 170 basis points from 9M13.

Indebtedness

(1) EBITDA in the last 12 months.

Net debt stood at R$214 million at the end of September of 2014, decreasing by R$1.832 billion from a year earlier. The reduction in net debt volume is explained by the higher cash generation in the period and improvement in working capital, as well the cash inflow of the public offering by Via Varejo . As a result, the Net Debt/EBITDA ratio decreased from 0.53x to 0.05x, in line with the level of the previous quarter.

Net debt, including Via Varejo’s payment book operation, stood at R$2.961 billion, decreasing R$1.726 billion from September 2013. The ratio of Net Debt with payment book/EBITDA stood at 0.64x at the end of 3Q14.

Financial Result

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The net financial result was an expense of R$378 million, increasing 21.2% from 3Q13, though lagging the cumulative increase of 29% in the interest rate (CDI) in the period. As a ratio of net revenue, the net financial expense increased from 2.2% in 3Q13 to 2.4% in 3Q14.

The main variations in net financial (income) expenses were:

·       Increase of R$ 23 million in bank debt charges, primarily due to the higher interest rate (CDI), which was partially offset by the higher yields earned on the cash in the period;

·       Increase of R$18 million in the cost of discount of receivables from payment books, which rose 26.1%, lagging the increase in the CDI rate. As a ratio of net revenue, this cost remained at 0.5% compared to 3Q13 ;

·        Growth of R$14 million in the cost of sale of credit card receivables, with variation of 8.9%, significantly below the increase in the interest rate due to the lower frequency of sales receivable.  

Sales of receivables volume (cards and payment books) amounted to R$8.3 billion in the period.

Net Income

(1)   Net Income adjusted by Other Operating Income and Expenses, thus eliminating non-recurring income and expenses as well as the respective effects of income tax

The Company net income amounted to R$390 million, growing 9.3% on the prior-year period, with net margin of 2.5%. The net income was driven mainly by the higher profitability at Assaí, Multivarejo and Via Varejo. The net income adjusted by Other Operating Income and Expenses totaled R$ 396 million.

Net income attributable to controlling shareholders decreased 2.1% in the period, reflecting the change in the equity interest in Via Varejo, from 52.4% in 3Q13 to 43.3% in 3Q14.

In 9M14 net income totaled R$ 1.087 billion, with a margin of 2.4%. Adjusted for Other Operating Income and Expenses, net income totaled R $ 1.165 billion, an increase of 19.2% compared to 9M13.

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Simplified Cash Flow Statement

The cash balance in the end of 3Q14 was R$6.601 billion, growth of R$ 1.245 billion compared to the beginning of the quarter, arising mainly due to the following factors:

(i)   Increase in cash generation from higher operating efficiency of the business;

(ii)  Improvement of 3 days⁽¹⁾ in working capital

(iii) Inflow of approximately R$900 million due to issuance Debentures in the quarter.

⁽¹⁾In days of COGS

Capital Expenditure

The Group’s investments amounted to R$532 million in the quarter. Multivarejo and Assaí accounted for 66% of total investment, followed by Via Varejo with 27%.  

In the third quarter, the Group opened 50 new stores: 31 Minimercado Extra, 2 Minuto Pão de Açúcar, 2 Assaí, 11 Casas Bahia and 4 Pontofrio.

In the year to September, the Group opened 52 Minimercado Extra, 3 Minuto Pão de Açúcar, 1 Pão de Açúcar, 3 Extra Hiper, 5 Assaí, 25 Casas Bahia and 4 Pontofrio, as well as 3 drugstores, for a total of 96 store openings.

During the year, the greater discipline exercised in allocating investments to new stores and renovations is explained by the better negotiations for new store openings and the review of construction methods, as well as other initiatives that optimized CAPEX per square meter.

For the coming quarters, the Company will continue to focus on organic growth, with acceleration in the pace of store openings compared to prior quarters.

Dividends

The meeting of the Board of Directors held on October 30, 2014 approved the distribution of interim dividends based on the net income recorded on the balance sheet of September 30, 2014, in the amount of R$35.8 million, which corresponds to R$0.14 per preferred share and R$0.127272 per common share. Shareholders of record on November 10, 2014 will be entitled to the payment. As of November 11, 2014, the shares will trade ex-dividends. Payment will be effected on November 21, 2014.

Appendix I - Definitions used in this document

Company’s Business Units: The Company’s business is divided into four units - food retail, cash and carry, electronics and home appliance retail (brick and mortar) and e-commerce – grouped as follows

Same-store sales: The basis for calculating same-store sales is defined by the sales registered in stores open for at least 12 consecutive months. Acquisitions in their first 12 months of operation are not included in the same-store calculation base.

Growth and changes: The growth and changes presented in this document refer to variations in comparison with the same period of the previous year, except where stated otherwise.

EBITDA: As of 4Q12, the results of Equity Income and Other Operating Income (Expenses) were included together with Total Operating Expenses in the calculation of EBITDA. This means that the calculation of EBITDA complies with Instruction 527 issued by the Securities and Exchange Commission of Brazil (CVM) on October 4, 2012. As from 1Q13, the depreciation recognized in the cost of goods sold, which essentially consists of the depreciation of distribution centers, began to be specified in the calculation of EBITDA.

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

Adjusted net income: Measure of profitability calculated as net income excluding Other Operating Income and Expenses and discounting the effects from Income and Social Contribution Taxes. Management uses this measure because it believes it eliminates nonrecurring expenses and revenues and other nonrecurring items that could compromise the comparability and analysis of results.