Considered one of the most sensitive sectors to changes in interest rates (Selic), retail ended the 4Q23 earnings season negatively impacted by pressure on household consumption. On the other hand, the segment has improving prospects throughout 2024, with some experts predicting that dealers will overtake Ibovespa.
In general, analysts agree that the year has started worse than expected for Brazilian stocks. The prospects for cuts US interest rates did not improve while increased pressure on inflation in Brazil could lead the Central Bank (CB) to reduce the pace of cuts Selic rate.
The latest decision of the Monetary Policy Committee (Copom), unanimous and widely expected by the market, reduced the Brazilian base interest rate to 10.75%, signaling “greater uncertainty and the need for greater flexibility in the conduct of the monetary policy”. “.
In case of see in detailFinancial statements of companies in the sector showed that consumption was under pressure in 4Q23, bearing the brunt of a still adverse consumption scenario, according to an assessment by BTG Pactual.
For the bank it is necessary to consider the dynamics of retail segment, which is still dictated by political/economic news flow. Despite signs of improvement, investors continue to avoid adding too much to their positions.
Furthermore, BTG believes that, following the reduction of earnings estimates late last year in response to the prospect of higher interest rates, there is little room for upward revisions in early 2024.
Suno Notícias has compiled the outlook of the major retailers on investors’ radar for this year. Watch:
Mercado Livre (MELI34) is a ‘winner’ in the e-commerce segment, says BTG
Considered the largest online commerce company in Brazil, the Free market (MELI34) is one of the retailers most appreciated by investors, especially after announcing that it will invest R$ 23 billion in Brazil in 2024, a figure 21% higher than the previous year and just over double the investment made in 2021 .
The company wants to expand the logistics area, a segment in which foreign platforms, such as, compete Amazon AND Shopeethey have increased spending in recent years, but they also want to compete with large local retailers like Casas Bahia (BHIA3) AND Luiza magazine (MGLU3), For example.
In the case of Brazilian e-commerce, the market prospects are for secular growth in the coming years, with GMV (an acronym in English for gross merchandise volume) much higher than pre-pandemic levels, although a higher financing cost high prevents most operators from maintaining the growth rates of recent years, paving the way for greater consolidation. “We continue to see the APPLES as a winner in the e-commerce and payments segments in Latin America,” writes BTG Pactual.
BTG: Lojas Renner (LREN3) is well positioned to gain market share
Another retailer that has been closely monitored by the market is Renner stores (LREN3). Despite the slowdown in sales in recent quarters due to a solid comparison base and a more challenging outlook for discretionary consumption, the company continues to be well regarded by analysts, aiming to gain market share in the apparel sector .
“In addition to the gradual improvement in profitability and net cash position, we see the company’s consumer lending business LREN as a beneficiary of potential interest rate cuts. Structural concerns depend on competition from purely digital players such as Shein – despite the growing debate on the taxation of international platforms – and Realize’s numbers”, underline the BTG analysts.
Last Tuesday (2), including, the Renner shares rose more than 4%, boosted by Bank of America (BofA) revised its guidance and price targets. On the home side, the retailer demonstrated significant progress in credit management, profitability and membership program membership, as well as increased liquidity, as reported in its latest 4Q23 balance sheet.
Grupo Soma (SOMA3): Itaú BBA sees an improvement in its profitability trend
After having sanctioned the measure in 2023 mainly for tax reasons, Itaú BBA began to have a constructive vision towards the Soma Group (SUM3) for the year 2024. The bank sees an improvement in the company’s profitability trend, which is expected to grow throughout the year.
“Our constructive vision with the evolution of profitability in 2024 is driven by the evolution of the efficiency project to Here you areefficiency gains (resulting from expense cuts made in the last quarter of 2023) and normalization of the company’s profitability farm Global,” the bank assesses.
The bank also sees great appreciation potential in the thesis thanks to the recognition of the synergies resulting from the merger withArezzo (ARZZ3), especially in generating additional revenue through the exploration of footwear and accessories from Grupo Soma brands. “We expect greater granularity in the value generation potential from synergies in the coming months,” emphasizes Itaú BBA.
Casas Bahia (BHIA3) and Magazine Luiza (MGLU3) are still sources of attention, says BB-BI
Among the companies in BB Investimentos’ coverage universe, the house noted that in March – the period in which the 4Q23 earnings season ended – Casas Bahia (BHIA3) saw its shares fall, reflecting results below estimates of the Marketplace.
To the Shares of Casas Bahia ended March with a 25% decline, representing the second highlight of the decline Ibovespa. The stock thus reversed the 14.58% appreciation recorded in February.
After a difficult 2023, Casas Bahia continues to face a challenging environment, according to several analysts. In the fourth quarter of 2023 (4Q23), the company presented an accounting loss of approximately R$1 billion, increasing losses by 513.5% in the year-on-year comparison.
In the case of its main competitor, Magazine Luiza (MGLU3), BB-BI found that, despite improving profitability, the retailer’s moderate sales growth worries the market. In the period, the adjusted net profit of Magalù was R$101.5 million, reversing the loss of R$15.2 million recorded in the same period last year. As a result, the administration called the period the “turnaround quarter.”
Overall, for BB Investimentos, the macroeconomic scenario remains positive retail sectorand expectations for the segment are for an evolution compared to the same quarter of the previous year, with the shares following a movement higher than that shown by Ibovespa.
“The decline in the credit granting curve, inflation under control, the rate Selic and declining default rates are some of the factors that have a positive impact on retailers, and which could lead the market to revise companies’ earnings projections upward,” he writes.
Source: Terra
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