By Andre Romani
SAO PAULO (Reuters) – Magazine Luiza posted an adjusted net loss of 112 million reais in the second quarter, after a profit of 89 million a year earlier, given the effect of interest on the financial result and a slight increase in sales, while margins, closely looked at by the market, showed recovery.
Without adjustments, Magazine Luiza had a loss of 135 million reais, with a profit of 95.5 million in the second quarter of last year.
Operating income measured by earnings before interest, taxes, depreciation and amortization (Ebitda) was 492.1 million, up 8% year-on-year. The adjusted Ebitda margin was 5.7%, up 0.6 percentage point from a year earlier and 0.7 point from the first quarter.
The company’s financial and investor relations director, Roberto Bellissimo, said that the margin growth is due to the expansion of the marketplace, an online platform for third-party sales, and strategies such as passing on inflation to prices and increasing interest-bearing sales.
The total revenue, however, had only a slight increase. The country’s retailers have been suffering from the slowdown in results, given the recent rise in interest rates and inflation, which affect consumer demand for products. Also, the baseline is strong given the boost in online revenue in 2020 and 2021 amid the pandemic.
Magazine Luiza’s total sales reached 13.9 billion reais in the second quarter, up 1.3% compared to the same period in 2021.
In e-commerce, sales grew 1.9% – and represented 72.1% of the total – with sales of products from the retailer’s own inventory falling by 6.8%, while those from its marketplace rose by 22%.
In the physical store operation, sales fell by 0.3% and in the same store indicator, they fell by 8.2%.
The financial result was the main cause of the retailer’s accounting loss, having been negative at 493.8 million, a deterioration of 115% compared to the same period of the previous year, especially due to the increase in interest, the Selic rate went from 2.75 % per annum in early April of last year to 13.25% per annum in late June this year, the company said.
Inventories stood at nearly 8 billion, down just over 100 million from March.
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Bellissimo said that sales of more traditional categories, such as electronics, tend to reflect in the second half of the year the evolution of macroeconomic indicators, such as inflation, which fell in July – despite still being above 10% in 12 months -, and the interest rates, which part of the market believes has reached its peak in the current high cycle, at 13.75% per year.
In addition, he said, the second half is usually better for retail, with Black Friday and Christmas. This year there will still be the World Cup, which usually increases sales of televisions and other products – the company, for example, owns the Netshoes sporting goods brand.
Magazine Luiza reached 200,000 sellers on its marketplace and said that, despite the weaker performance of traditional products, new categories such as fashion and beauty have been experiencing strong growth.
Recently, Magazine Luiza’s cost cutting also hit the marketplace, as did competitors. About two months ago, the retailer raised its commission for sellers who receive early, and earlier this year, it had revised its free shipping policy.
Bellissimo explained that the advance payments measure was an interest pass-through, which had not been done since the beginning of the Selic high cycle, and stated that there are no new measures planned to cut costs in the marketplace.
Asked about doubts in the market about the long-term impact of these measures, in a highly competitive e-commerce environment, he said that “even with this interest rate pass-through, we continue with a very competitive value proposition and one of the most efficient from the market”.
The marketplace has been contributing more to the company’s margins because of these measures and growing in “the same way”, he added.
Another action that generated noise was a promotional video by Magazine Luiza for customer credit, with the presence of the chairman of the board, Luiza Trajano. Bellissimo said the retailer does a number of actions, noting that this one was for pre-approved customers only. “It’s a sales search action, but this time we did it with an additional video”.
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