Brazilian retailer GPA is preparing for an aggressive price war by cutting expenses across its supermarket formats, in a bid to maintain operating profit margin in its food business.
It aims at winning more customers with more competitive prices in all its supermarket formats at the cost of the unit's gross margin.
To lower prices, GPA also plans to run more efficient stores, cutting corporate overheads and wringing cost savings by working more closely with Casino.
The planning came into effect as economists in Brazil are forecasting weaker growth and higher inflation next year, forcing retailers to fight for each other's market share.
GPA expects to reduce sales, general and administrative expenses to 17% of net revenue by 2016, from 19.6% currently. The retailer also expects sales in stores, which are open at least 12 months, to continue to rise, faster than inflation.
GPA expects to open 400 new food stores and 360 new convenience stores in its Mini Mercado format. The group's electronics and furniture unit, Via Varejo, is targeting 210 stores during the period.
The company is also planning aggressive expansion of its wholesaler, Assai, with 12 to 15 store openings per year through 2016. Growth would be focused specifically in Brazil's poorer and faster-growing northeast.
