So itsmean that (they and You formal) same?
From the verb form, yes.
The pronoun is capitalised differently, though: sie = they, Sie = you.
(At the beginning of a sentence, you can't tell the difference -- but you can in the middle of a sentence, where the formal "you" is still capitalised.)
Both can be correct. Sie can mean they or you (formal). The only way you can tell the difference is if the sie is capitalised or not (capital S means formal you). But since this is at the start of a sentence, it remains ambiguous.
One more thing. The informal way to say you eat the bread is Du isst das Brot.
Saying "They are eating bread" is wrong seems a little harsh
It is wrong, though.
Sie essen Brot. = They are eating bread.
Sie essen das Brot. = They are eating the bread.
Two different sentences with two different meanings. The second one is talking about a particular, known quantity of bread; the first one is not.