SAO PAULO, May 7 (Reuters) - Carrefour Brasil, which is

controlled by France's Carrefour, reported a net

profit of 39 million reais ($7.7 million) for the first quarter,

reversing losses in the same period last year, as higher food

inflation expanded its profits.

On an adjusted basis, it also swung back to the black with a

52-million-real net profit, although this profit came in below

the forecast of 137.4 million reais from analysts polled by

LSEG.

Carrefour Brasil had already disclosed its first-quarter

sales figures in late April, which rose 2.5% year-on-year, with

hybrid wholesale unit Atacadao, which accounts for nearly 70% of

the group activity, growing sales by 6.6%.

"We have seen a recovery of food inflation to positive

levels, which obviously had positive effects in our prices and

volumes," CEO Stephane Maquaire told journalists on Tuesday.

He added that recent food inflation trends have triggered

improved sales by Atacadao to corporate customers, mainly

smaller grocery stores, which had reduced their purchases due to

financial pressures from lower margins.

"Merchants have been recovering their dynamics of buying to

replenish stocks," he said, adding this dynamic is just "in the

beginning".

About Carrefour Brasil's retail segment, which saw sales

slip more than 10% in the quarter, Maquaire said management has

been starting to test lower prices for some basic products

aiming to increase the unit performance.

Carrefour Brasil said its consolidated adjusted earnings

before interest, taxes, depreciation and amortization (EBITDA)

rose 36.6% to 1.42 billion reais, slightly above analysts

forecast of 1.33 billion reais.

Adjusted EBITDA margins rose to 5.7% from 4.3% a year

earlier.

Maquaire also said the company temporarily closed seven

stores of almost 100 owned in Brazil's southernmost state of Rio

Grande do Sul, where heavy rains have caused deadly floods in

recent days.

He added the company decided to freeze all prices in Rio

Grande do Sul until the end of May.

($1 = 5.0744 reais)

(Reporting by Andre Romani; Editing by Steven Grattan and

Lincoln Feast.)