Exito Falls as Citigroup Sees 18% Profit Drop: Bogota Mover

Almacenes Exito SA (EXITO) dropped as Citigroup Inc. forecast Colombia’s largest retailer will report an 18 percent decline in profit this year, challenging analysts’ consensus view that earnings will rebound.

Shares declined 0.3 percent to 32,500 pesos at 11:53 a.m. in Bogota, after earlier dropping as much as 1 percent. The benchmark Colcap index gained 1 percent.

Exito’s earnings decline will accelerate to 18 percent by year-end from a 4.7 percent drop in the first quarter as competition picks up in the industry, Citigroup analysts Julio Zamora and Marcela Munoz wrote in a report today.

Citigroup’s call for a decline compares with a median estimate in a Bloomberg survey of four analysts for a 7 percent gain in the company’s profit to 507 billion pesos this year.

“We are looking for margin pressure from new competitors and a lower margin sales mix to further the impact on net income,” the Citigroup analysts wrote. “The level of competition in Colombia will become more intense in the coming years.”

Citigroup initiated coverage of Exito, which is based in Medellin, with a “sell” rating and a twelve-month target price of 30,400 pesos, which would mean a 5.5 percent loss from current levels, including dividends, according to the report.

To contact the reporter on this story: Christine Jenkins in Bogota at cjenkins28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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