analysts say whether it is worth investing in retail

With a less serious impact than the Lojas Americanas crisis, which emerged in January 2023, the request for judicial recovery of Casas Bahia, which was released on Sunday (28), reveals that retail at a national level has not yet reached calm, as far as the economic sector is concerned. The network presented a reprofiling of R$4.1 billion in debts, debentures, the majority of which were centralized in Banco do Brasil and Bradesco.

With a grace period of 24 months for an interest payment, and a grace period of 30 months for making the principal payment and a full term of 78 months, for the debt in a manner using a type of amortization, this is the agreement for the Casas Bahia can recover its financial situation.

On Monday (29), the first trading session following the announcement of the extrajudicial recovery, there was an increase of 32.5% in Casas Bahia shares. Faced with some instability, shares continued to rise and ended the first week with an increase of 46%.

“At first glance, the announcement is very positive for investors”, says Lucas Lima, analyst at the independent house VG Research. However, it is worth highlighting the risk of great dilution for shareholders, as the operation contemplates the possibility of creditors opting to convert the debt into shareholdings.

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_{Images of branches of Bradesco, Banco do Brasil and Ecommerce (Photo: reproduction/Bloomberg/moment Oscar Wong/Getty Images Embed)}

The financial situation after the out-of-court settlement

Marcelo Noronha, CEO of Bradesco, on Tuesday (30), spoke about the banking institution's results in the first quarter, but was questioned about the agreement, given that Bradesco is one of the main creditors. Discreetly, without exposing the details of the transaction due to banking secrecy, Noronha informs that, “our exposure to a specific client has been comfortably provisioned since the end of 2023”. In the coldest language of bankers, Noronha said between the lines that Bradesco, Casas Bahia's economic partner since 2004, was already expecting a bad situation.

Financial momentum increased after the decision taken by the retail chain. The questions asked by analysts will be satisfactory. According to Valter Bianchi Filho, investment director and founding partner of Fundamenta Investimentos, extrajudicial recovery, “raises a significant warning about the intense competitive pressure that affects the retail sector in Brazil”.

The impact of e-commerce on traditional commerce

Bianchi says that the unfavorable factors for the sales sector are the high interest rates in recent years, in addition to the decline in financial income and consumer debt, and also with competition from foreign e-commerce platforms, which They raise offers with values ​​that are atypical of those offered by traditional stores. Companies like Mercado Livre and Amazon are examples of these types of foreign companies. “There is also the issue of purchases on foreign websites that arrive in Brazil with significant tax advantages”says the investment director.

Valter highlights that the crisis in traditional retail is a global trend. Online sales platforms have gained a lot of space compared to physical stores and sell standardized products. “This episode further increases the perception of risk in relation to the retail sector, which is one of the largest employers in Brazil, alongside the civil construction sector”explains.

The analyst highlights that companies in the retail sector, such as Magazine Luiza, were looking for modernization so that they could compete in e-commerce, even without reaching the same scale as Amazon and Mercado Livre.

“Even so, Magalu is not immune to the challenging environment for retail in Brazil. The company's prospects are strongly linked to the direction of interest rates in Brazil, which are closely related to the country's fiscal situation and the recovery of the population's real purchasing power.”he states.

Featured photo: Casas Bahia in Rio de Janeiro (Reproduction: Nadia Sussman/Bloomberg/Getty Images Embed)