Brazil’s Magazine Luiza Achieves Third Profitable Quarter
Magazine Luiza (Magalu) reports its third consecutive profitable quarter. The company reversed previous losses, showing significant financial improvements.
It posted a net profit of R$24 million ($4.32 million) in Q2 2024. Recurring results show a profit of R$37 million ($6.67 million). This contrasts sharply with last year’s R$198.8 million ($35.82 million) loss.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 62% compared to 2023. In addition, it reached R$711 million ($128.11 million) with a 7.9% margin. Analysts’ projections were surpassed.
Operational Highlights
Operational cash generation over the last 12 months reached R$2.2 billion ($396.40 million).
Improved operational results and better working capital management drove this growth. The company maintained optimized inventory levels.
“Operational cash flow was a record,” said Roberto Belissimo, CFO of Magazine Luiza. “Capital increases eliminated short-term debts and maintained a high cash position.”
Total sales reached R$15 billion ($2.70 billion), a 4% increase from last year. This sets historical records for the period.
Net revenue totaled R$9 billion ($1.62 billion), a 5% increase over Q2 2023. The gross margin grew by 2.1 percentage points, reaching 30.9%.
Physical and Online Sales
Physical stores drove total sales growth with a 16% increase. This was the highest since the pandemic.
However, growth was notable in new regions like Rio de Janeiro and Brasília. The company gained market share in a more rational competitive environment.
In e-commerce, the marketplace remains the main sales channel. It now accounts for 40% of total sales. Additionally, the 3P (third-party) segment increased profitability by boosting service revenue. This grew by 11.2%.
Currently, 21% of total marketplace orders are fulfilled by the company. Expectations are to reach 30% by year-end.
Strategic Partnerships and Financial Position
The partnership with AliExpress starts in Q3. It will accelerate 1P (first-party) sales and expand the 3P assortment.
Magazine Luiza ended the quarter with an adjusted net cash position of R$2.0 billion ($360.36 million).
However, this marks a R$1.1 billion ($198.20 million) year-over-year increase. The total cash position is R$6.5 billion ($1.17 billion).
Financial Services
Luizacred, the financial arm, showed significant improvement. It turned a R$66 million ($11.89 million) loss into a R$70 million ($12.61 million) profit.
Positive trends in card delinquency indicators drove this improvement. Card billing reached R$14 billion ($2.52 billion). MagaluBank processed a total payment volume of R$23.4 billion ($4.22 billion).
In addition, the company expects Luizacred to expand its portfolio, with profitability returning. It plans to offer more consumer credit, which is crucial for boosting sales.
“We believe Italy will relax approval rates,” said Belissimo. “They may focus more on sales growth.”
New Consumer Credit Line
Magazine Luiza launches a new consumer credit line for online customers. This will serve as an additional e-commerce payment method.
The company believes it will accelerate online sales in H2. “We see consumer credit’s importance in physical store sales,” added Belissimo. “It’s an additional sale that can accelerate sales.”
Overall, Magazine Luiza’s strategic initiatives position the company well. Improved financial metrics and strong sales performance indicate continued growth and profitability.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
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