Magalu (MGLU3): “Go to one of our stores, please”, says Luiza Trajano; stock rises 10%, but closes stable

Amid rising interest rates and tightening financing terms, Magazine Luiza (MGLU3) announced that it will offer pre-approved credit to more than 10 million customers. The campaign targets the company’s customers who meet the criteria for granting credit established by the company itself and by the group’s finance company, LuizaCred, a partnership with Itaú.

Faced with the repercussion, the company’s shares rose by 10.43% at the maximum of the day, returning to the level above R$ 3 (R$ 3.07), but turned to fall during the afternoon, in a movement followed by the entire sector. MGLU3 shares closed slightly down by 0.36%, at R$2.77.

Until this afternoon, around 5 million customers with this profile had already received targeted communication material, which includes a video starring Luiza Helena Trajano, president of the board of directors of Magalu.

The video, however, took to social media this Monday even without an official post from Magazine Luiza, and was accompanied by criticism about the businesswoman’s supposed despair with low sales.

Selling campaign

For Eduardo Terra, president of the Sociedade Brasileira de Varejo e Consumo (SBVC), the strategy is bold, true and with “the face of Magalu”. He recalls that the company has sought to use more “the figure of Luiza Trajano, who is full of truth and with very low rejection as a sales tool”.

For him, despite the harsh criticism that the video has received, the investor of the paper will hardly look at the content and associate it with despair. “It is a time when the entire retail sector is in need of creative strategies and this is generating repercussions”, he says.

In the video, Luiza talks about pre-approved credit for customers and invites the public to go to the stores. “It will be in the meat. Remember that ‘yummy little meat’? In installments that you can pay and we will even give a discount on interest. We are waiting for you. Go as soon as possible to one of our stores, please”, says the president of the company’s board in the material sent to customers and shared on social networks.

“A large part of Brazilians depend on credit to continue to consume”, says Frederico Trajano, CEO of Magalu. “At a time like the current one, the trend is for companies to cut their lines. But we know, through our data and analysis system, that there are more than 10 million customers in our base that have all the conditions to honor their commitments. We want these people to know that they can count on Magalu at all times, especially in the most difficult ones.”

The company did not comment on the criticisms of netizens to the company, which also involve Luiza’s associations with the PT’s pre-candidate for the presidency of the republic, Luiz Inácio Lula da Silva. According to the company, the Magalu campaign favors the customers of the company’s almost 1,500 physical stores, distributed throughout Brazil.

Despite the volatility in the session, Magalu shares recorded a month of gains on the stock exchange, of around 20%, mainly amid a movement from value assets (such as commodities) to growth (such as techs and retailers) .

However, analysts are still quite reticent about the scenario for electronics retailers in general on the Stock Exchange, which includes Magazine Luiza. Year-to-date, shares are still down 61%, in a scenario of greater competition and high inflation.

XP highlights that, for the results of the second quarter of 2022, in e-commerce, it expects a dynamic of results similar to 1Q22, with recovery of physical retail, weakening of the online channel of own stock (1P) and slowdown in the growth of the marketplace (3P) due to the challenging macro scenario, challenging comparison base and channel adjustment due to the normalization of out-of-home consumption.

“We expect companies to continue to show margin recovery, due to a more rational competitive environment and channel mix, but we should continue to see a pressured profit dynamic due to still tight margins and increased financial expenses due to high interest rates” , points out the analysis team. The recommendation for MGLU3 assets is neutral.

Still on the sector’s radar, retail sales in June 2022 grew by 5.9%, discounting inflation, compared to the same month in 2021, points out the Cielo Expanded Retail Index (ICVA). Despite the increase, it was the third consecutive month of loss of strength. In nominal terms, which mirror the sales revenue observed by the retailer, the indicator increased by 22.8%.

According to Cielo, the increase in sales is associated with the comparative base of June last year, a period in which commerce was still restricted due to covid-19. Calendar effects had little influence on the result: although there was one more Thursday (the hottest trade day) and one less Tuesday (the date when sales are usually weaker) than in June last year , the impact on sales volume due to the Corpus Christi holiday this year was greater, which offset the mix of days.

(with Estadão Content and Reuters)

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