Companhia Brasileira de Distribuicao: 2Q26 Earnings: Debt Recovery Plan Progress Amid Deteriorating SSS

Research evidence excerpt

M

Update

August 5, 2026 02:00 AM GMT

Companhia Brasileira de Distribuicao | Latin

America

Morgan Stanley C.T.V.M. S.A.+

Alexandre K Namioka, CFA

Equity Analyst

2Q26 Earnings: Debt Recovery

Plan Progress Amid

Deteriorating SSS

Morgan Stanley & Co. LLC

Andrew R Ruben

Equity Analyst

Morgan Stanley C.T.V.M. S.A.+

Joao Marcelo Nogueira

Research Associate

AlphaSignals Earnings Reaction

Companhia Brasileira de Distribuicao (PCAR3.SA, PCAR3

Unchanged

In-line

Largely unchanged

BZ)

Impact to our thesis

Financial results versus consensus

Direction of next 12-month

consensus EPS

LatAm Retail & eCommerce | Brazil

Source: Company data, Morgan Stanley Research

Key Takeaways

SSS of -1.2% decelerated from +0.7% in 1Q, and came in below MSe (+0%), with

Stock Rating

Industry View

Price target

Shr price, close (Aug 4, 2026)

Mkt cap, curr (mm)

52-Week Range

Underweight

No Rating

R$1.75

R$2.75

R$1,381

R$4.60-1.40

the extrajudicial recovery plan leading to operating disruption early in 2Q.

Gross margins +310bps y/y to 30.5% were a highlight, with adj. EBITDA margins

+160bps y/y to 10.6% — coming in above MSe (9.8%), partly due to tax credits.

Other operating and financial expenses limited operating upside flow-through,

with net margins -100bps y/y to -4.8%.

Limited visibility on the path to positive earnings and to contingencies resolution

(~R$14bn of total contingencies) keeps us UW-rated.

GPA Brazil's -1.2% SSS was below our forecast. Adj. EBITDA margins expanded

+170bps y/y to 10.6%, while flow-through remained pressured with a -4.8% adj.

net margin. Comps for GPA Brazil were -1.2% y/y, or -0.8% y/y excluding calendar

impacts. Comp growth was led by +0.4% in the Mercado Extra banner, with declines

in each of Proximity (-2.3% in 2Q) and Pao de Acucar (-1.2%). Online sales decreased

-16% y/y, as management focuses on more profitable channels, with digital

penetration -160bps y/y and -50bps q/q to 11.1%. Altogether, GPA Brazil net revenue

decreased -10% y/y, additionally impacted by the phase-out of B2B 'Aliados' sales;

the result was -3% below MSe. Gross profit +0.7% y/y was the highlight in the

quarter, with gross margins +310bps y/y to 30.5%, largely due to the discontinuation

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