ASAI - Sendas Distribuidora: The Costco Of Brazil

2024-05-28 07:23:58 ET

Summary

• Assai is the second largest grocery player in Brazil's cash and carry segment, with significant growth potential.
• The company has been aggressively increasing its store count and expects continued organic store growth.
• Profitability has been impacted by investments in store conversions and store openings, but is expected to improve as the stores mature and SG&A costs decrease.

Introduction

Sendas Distribuidora ( ASAI ) or Assai is the second-largest grocery player in Brazil focused on the cash and carry segment of groceries. Assai executed a transaction with its former parent company GPA in 2021 to acquire 70 hypermarkets to convert into Assai stores. This transaction promised growth, which has materialized as of 2024. Profitability suffered as the company digested the large amount of new stores but this year's SG&A to revenue is finally starting to come down, and the company is set to get back to 5% EBIT Margins. The stores are still relatively young, which should mean continued high growth coupled with a return to higher profitability means ASSAI could be a strong performer....

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