SAO PAULO, Nov 12 (Businesshala) – Brazil’s three most-flying retailers were cut in size this week during the pandemic, showing rising inflation and weak demand dented margins, reducing their Nearly 25 billion ($4.58 billion) fell short of the collective market value. ,
The worst performers on Friday, after most retailers released results, were magazine Luiza and cosmetics maker Natura & Co. Holding.
Magazine Luiza, whose shares soared in recent years as it became one of Brazil’s best-performing e-commerce companies, faced mounting pressure on discretionary earnings, and a sharp drop in third-quarter profit.
This week’s selloff, which comes against a backdrop of weaker-than-expected Brazil’s economy, was the latest blow to hopes that the country’s reforming COVID-19 outlook will lead to increased consumer demand and corporate profits.
Magazine Luiza CEO Frederico Trazano said lower-than-expected third-quarter sales pushed up its inventory by 100 days, above the company’s ideal benchmark of 70 days.
“We weren’t expecting this drop in store sales,” he said, adding that the company could use some promotional sales to reduce inventory.
In a report to customers, Bank of America analysts said the retailer’s consumers are suffering from declining real wages, higher debt levels and employment rates that are struggling to return to pre-pandemic levels.
Credit Suisse analysts Victor Saragiotto and Pedro Pinto said in a note to clients “disappointed, but not surprised.” Common shares in the magazine Louisa were down 16% in afternoon trading, at 11.61 reais. The company lost $13.9 billion in market capitalization on Friday.
One of its main competitors, Via Varejo, did well on Friday after a sharp drop after its earnings release on Thursday came with a surprise provision for payments in labor disputes. On Thursday, Via Varejo lost 1.4 billion reais ($257.4 million) in market capitalization.
Shares of cosmetic maker Natura also fell as the company lowered its outlook and reported weak earnings, with third-quarter EBITDA falling 47%, primarily impacted by weak profitability in Latin America. The company, which owns London-based Avon Products, pushed its guidance to a 14% to 16% EBITDA margin from 2023 to 2024, citing inflationary pressures and supply chain problems.
In early afternoon trading, shares in Natura were down 16% at 33.58 reais, despite the intention to announce a share buyback program and move its main listing location from So Paulo to New York. The company’s market capitalization fell by $9.3 billion ($1.7 billion) on Friday.
The only exceptions to Friday’s bloodbath were retailer Lojas Americana and sister company Americanas S.A., which enjoyed a higher growth in online sales than the magazines Luiza and Mercado Libre. Bradesco BBI analysts led by Richard Cathcart said in a note to customers, “With a plethora of cheaper products on offer, the American people are looking to weather the decline in disposable income.”
“The diversification of Americans’ online mix is likely to be an advantage as we head toward Black Friday this year, given the slowdown in demand for big-ticket, discretionary goods,” the report said. Is.
Shares of Americanas SA, formerly known as B2W Digital, were up 7% in afternoon trading at 37.78 reis.