Eighteen months after closing its doors, Brazilian retail operations are back in full swing. The end of the social isolation measures imposed to contain the advance of the Covid-19 pandemic, which so far reached the terrible mark of 560,000 deaths, resulted in the resumption of sales, which are beginning to show strong signs of recovery. The return to normality is due to the significant advance in the pace of vaccination of the adult population, after a clear attempt by the federal government to boycott the immunization campaign of Brazilians. Now, almost half of the Brazilian population has already taken at least the first dose, which guarantees greater security for a gradual return to shopping.
Monthly Trade Survey, released in early July by the Brazilian Institute of Geography and Statistics (IBGE), shows that sales in retail trade rose 1.4% in May this year compared to April — which, in turn, had already recorded a high of 4.9%. In the accumulated result for the year, the positive variation reached 6.8% over the first five months of 2020. The arrow is pointing upwards. The trend is for improvement in indicators from the third trimester, with more vaccines in the arm of Brazilians and fewer patients in ICU beds.
And no industry personifies this rebound in retail sales more than shopping malls. If it’s still not possible to see crowded corridors and customers with bags strolling through the stores, the scenario in which a good part of the store owners of developments in Brazil had to make sacrifices to survive even behind closed doors is in the past. At the height of the crisis, the drop in sales exceeded 90%.
Now, expansion plans and investments that had been dammed up have been resumed by the large companies in the sector. Counting on the appetite of mall owners, the segment will come out of the crisis. But there is still a crossing to be won in the coming months. Data from the Brazilian Association of Shopping Centers (Abrasce) show reheating. In the week of July 19th to 25th of this year, the 601 malls in the country registered a 14.3% growth in revenue, compared directly with the same week of the previous month, between June 21st and 27th.
In 2020, the malls’ revenue was R$ 128.8 billion, well below the R$ 192 billion in 2019. The initial perspective for 2021 was to reach R$ 130 billion, slightly above 2020. Now, revenue of R$ 150 billion is expected this year. Still far from the year before the crisis caused by the pandemic, but already detached from the fall suffered in 2020.
Although far from reaching the levels of the pre-pandemic period, the number is significant. The segment, which reached 100% of shopping malls closed in the last week of March 2020, already works with the maximum capacity of open stores. Only some sectors, such as cinemas, theaters and recreational spaces, are still in a gradual phase of restart.
CAUTION The peak of Covid’s cases in February and March of this year and the advance of a second wave scared the business class, but the relaxation of restrictive measures after the fall in the number of hospitalizations in April encouraged the sector. Good sales results came in May, driven mainly by Mother’s Day. For the president of Abrasce, Glauco Humai, the moment is very different from last year. “Today we live a scenario of optimism with caution. The malls did their homework and ensured all security protocols. The sector is resilient and professional”, he stated. The recovery, according to the executive, is also seen in the vacancy rate and the number of jobs that have already been recovered since the beginning of the retail crisis. The segment directly generates 1 million jobs and, since the beginning of the pandemic, 100,000 jobs have been lost. But 60,000 have already been recovered. Of the 110,000 stores in Brazil’s shopping centers, at least 12,000 have closed for good, starting from the beginning of the pandemic. “But 7,000 new stores have already entered the malls, which brings us to a negative result of 5,000. The signing of new contracts and prospects for openings make us believe that we are going to recover these numbers,” said Humai.
With 31% of the total number of malls in Brazil (188 units), the state of São Paulo has a more defined schedule regarding the effective green light for retailers. And it’s directly linked to the state’s immunization plan. The forecast, announced last week by Governor João Doria is, until the next 16th, to vaccinate 100% of the adult population that lives in the state with at least the first dose. With this, the following day is already seen as the day of resumption, with the end of public and time limits in São Paulo commerce. Without prejudice, of course, to the still necessary distancing protocols, the use of protective masks and alcohol gel. The total opening is the clearest evidence that retailers can plan a year end very different from 2020.
JACAREPAGUÁ Abrasce estimates that five new projects will be opened by the end of the year. One of them belongs to the Multiplan group, one of the largest companies in the segment, with 19 malls in the country and around 5.8 thousand stores. The twentieth unit will be in the district of Jacarepaguá, in Rio de Janeiro, and is expected to be delivered in November. Construction of the new mall, which will have 237 stores, began three years ago. It should have opened last year, but work was delayed by the pandemic. Investments in the new shopping center in Rio de Janeiro were around R$ 1 billion, according to Multiplan.
The resumption of construction during the period of social isolation shows the company’s confidence in this new economic moment. The balance of the second half also reflected this indication of recovery. The rental revenue reached, between April and June this year, R$ 258.4 million, an increase of 286% over the same period last year. Another index that reinforces the return of customers to the corridors is the increase in revenue from the parking division. In the second quarter, the group collected R$ 32 million, an increase of 601% over 2020.
The clear bet is on the repressed demand of those who for so long did not go shopping in person. For the president of the company, José Isaac Peres, the resumption is consolidated. “The month of July was practically the same as that registered in 2019. This represents an economic recovery and job creation,” he said. “The movement last weekend at Barra Shopping was similar to Christmas 2019 in terms of car volume. There is a circulation limit, but people are more objective and staying less in the mall”, he said.
“Today we live a scenario of optimism with caution. the malls did their homework and ensured security protocols. The sector is resilient and professionalized” Glauco Humai, president of the Brazilian Association of Shopping Centers.
Peres understands that the segment was heavily penalized with the closures. “There have been cases of closed doors for seven months. Closing a month already has a big impact. Retail trade lives on continuous activity”, he said. “The industry was seen as an unnecessary villain. Shopping is the solution.”
Multiplan also made moves to help the store owner in this difficult journey. According to the president, the company made waivers of around R$ 1.2 billion, including rent and condominium charges. “For a good part of last year, we only charged half of the tenant’s condominium. We live in a permanent partnership. There was no point in charging rent during this period”, said Peres.
HIGH INCOME Leader in the luxury retail segment, the JHSF group will also invest in the expansion. Today, the company has six malls and plans to open three more projects by 2023. Total investments should reach R$ 400 million. The new businesses include a unit on Avenida Brigadeiro Faria Lima, in São Paulo (the main financial corridor in Brazil), another in the Real Parque neighborhood and a third in the high-end luxury condominium Fazenda Boa Vista, in Porto Feliz, in the interior of the state. The works begin later this year.
In the first quarter, the company’s shopping mall segment recorded net revenue of BRL 38.7 million, slightly below the first quarter of 2020 — which, in practice, was not affected by the pandemic. Lease revenue represents about 10% of JHSF’s revenue. Shopping Cidade Jardim, which accounts for 40% of the group’s shopping mall business, had a 9.2% increase in sales. It is estimated that the second quarter will register significant growth, driven mainly by the surge in April and May, which should exceed 30% compared to the corresponding months of last year.
For Thiago Alonso, CEO of JHSF, the investor’s thinking must be directed to the moment beyond the crisis. “Anyone who makes a decision based on the pandemic will make a mistake. Our role is to look at the short, medium and long term scenario and understand where things are going. We understand that we will guarantee more quality by being closer to our customer.” With the new malls, the group’s gross leased area (GLA), which today is 65 thousand square meters, should grow at least 85%. According to the CEO, the bet on regions already known by the group, where it has a presence in other businesses, such as the Fasano restaurant, shows JHSF’s certainty in the resumption of presence in the offices. “What will happen is greater flexibility. But whoever doesn’t go back to living the day-to-day life of the company, may be disconnected”, said Alonso.
The coming weeks, in the assessment of Glauco Humai, will be decisive for consolidating the sector’s recovery. “By the trend, we should reach the same level of sales in the pre-crisis period in six to eight weeks”, he said. A fatter Christmas with the population vaccinated. The dream equation for anyone who understands the need for balance between health and economy.
SHOPPINGS ON PROMOTION
The outlook for retail is optimistic after the economy returns to normal. And market analysts are especially optimistic about one of the sectors most affected by the pandemic, shopping malls. The reason is simple: unlike multichannel companies, which have both physical and online stores, malls are totally dependent on the flow of people. “Their main sources of income, in addition to store rent, are revenue from parking and advertising earnings,” said Valor Investimentos expert Davi Lelis. “With fewer visitors, these two revenues decrease and store owners also sell less, failing to honor their rents.”
It is not by chance that the actions of shopping center administrators were the most penalized in the pandemic, along with the roles of airline companies. However, market projections are that all measures to restrict travel in the capitals have been lifted by the beginning of November, according to Zahl Investimentos partner Joni Vargas. “That should be reflected in record sales at Christmas this year,” he said.
For Vargas, not even the rise in interest rates should prevent this resumption of purchases. There is a pent-up demand from consumers that must be met now, especially for items of lower unit value. In addition to the movement of stores, spaces such as movie theaters and food courts should again attract consumers. For him, the most promising actions in the sector are those of the administrators Multiplan and Iguatemi.