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The "Dynamic" of Deflation Troubles Another Brazilian Food Company

In these pages, we showed this Feb. 20 quote from Nasdaq.com:

Companhia Brasileira de Distribuicao CBD or Grupo Pao de Acucar reported fourth-quarter 2017 results, wherein adjusted net income from continuing operations came in at R$159 million ($48.9 million), down 18.4% from R$195 million ($60 million) recorded in the year-ago period. Results were impacted by soft EBITDA margin that in turn was hurt by food deflation.[emphasis added]

Now, another Brazilian food company is bedeviled by the "dynamic" of deflation.

Here's an excerpt from an April 11 Reuters article titled, "Carrefour Brasil quarterly sales rose, but deflation again weighed":

Gross sales at food retailer Carrefour Brasil SA increased 6 percent in the first quarter from the same period a year earlier to 12.29 billion reais ($3.6 billion), though as in previous quarters, stubborn food price deflation limited gains.

In a securities filing late on [April 10], the company said same-store sales, a measure of revenue from stores open at least 12 months, rose 2.3 percent in the quarter when calendar effects, or different numbers and timing of selling days, were taken into account. Without taking into account calendar effects, same-store sales grew a more modest 0.4 percent.

Carrefour Brasil’s results reflect two competing dynamics in Brazil’s food retail sector. Sales are generally rising across the board as consumers drive a rebound in the country’s economy, but food prices continue to disappoint.

In the first quarter, food price deflation came to 4.0 percent, according to the government.

As we've noted before, Elliott Wave International's Chief Market Analyst, Steve Hochberg, has been ahead of this trend in food price deflation:

More than a year ago, the November 2016 Elliott Wave Financial Forecast said:

Since June, EWFF has been tracking an all-important change in consumer behavior. So far, we’ve detected its presence by deflationary tremors in grocery prices … .

Expect this deflationary trend in food prices to deepen in the months ahead.

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