Brazil retailers brace for weak fourth-quarter, analysts say
today Jan 16, 2017
Brazilian retail and consumer goods companies may post weak fourth-quarter results as the worst recession on record continued to hurt the sales and profitability of the country's largest brick-and-mortar chains, analysts said on Monday.
Recent data showed that retail sales fell 6.4 percent nationwide in the first 11 months of last year, a sign that record unemployment and the highest borrowing costs in almost a decade had put shoppers on the defensive.
Apparel firms may report the weakest results in the sector, led by Marisa Lojas SA and Cia Hering. Lojas Renner SA, which opens the earnings season for retailers on Feb. 9, may also post "uninspiring" earnings, analysts at Banco BTG Pactual said in a client note earlier in the day.
The pessimistic expectations underscore the challenge facing retailers in Latin America's largest economy, where a decade-long spending boom ended abruptly three years ago, replaced by rising urban unemployment and defaults linked to costly and scarce credit.
Analysts at HSBC Securities said that consumer spending is unlikely to return to pre-crisis levels soon, as a "new, frugal consumer" pursues value and does more shopping online, putting pressure on traditional supermarkets and appliance retailers.
Sales data that retailers release ahead of quarterly results have added to evidence of a more thrifty Brazilian consumer.
GPA SA's sales data last week showed mixed results as food sales rose 12.1 percent last quarter, but analysts warned that Brazil's biggest retailer had sacrificed profit margins to retain customers.
At Via Varejo SA, GPA's appliance unit, net sales fell 0.7 percent last quarter on an annual basis despite a robust performance during Black Friday sales in late November.
Results at cosmetics maker Natura SA might have suffered in the face of struggles implementing new strategies to boost door-to-door sales, Itaú BBA analysts said.
Still, the growing appeal of online retailing might have helped some retailers, analysts said.
Shoemaker Arezzo Indústria & Comércio SA could post a 7 percent rise at stores open for at least a year, with online shipments bolstering results, analysts at Santander Investment Securities said.
For B2W Cia Digital SA, the e-commerce arm of Lojas Americanas SA, Brasil Plural forecasts double-digit growth in gross merchandise volumes.
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