Via Varejo: R$1 billion profit in 2020; plans to become Brazil’s largest marketplace

RIO DE JANEIRO, BRAZIL – Via Varejo, owner of Casas Bahia and Ponto Frio, posted a net accounting profit of R$1 billion (US$173 million) last year, compared to a loss of R$1.4 billion the previous year. The performance virtually offset the damage caused by the problems found in the 2019 balance sheet, which led to a billion-dollar adjustment in that year’s fourth-quarter balance sheet, a legacy of the previous management.

But last year’s number also has extraordinary impacts, positive this time. Without this impact, the profit would have amounted to R$167 million, which better reflects operational performance. “Nevertheless, above the market consensus that pointed to R$140 million”, says Roberto Fulcherberguer, the company’s CEO.

But what most excites Fulcherberguer, despite the 2020 achievements, is not the past, but what’s to come. “My turnaround is over. From here on out, I’m only focused on evolution and growth,” he says, with a list of announcements to be made about what he’s already seeing in the 2021 performance.

Despite the pandemic, which left 80% of stores closed for at least one full quarter, the company had net revenues of R$28.9 billion in 2020, a growth of 12.7 % compared to the previous year. Adjusted EBITDA stood at R$2.9 billion, compared to R$1 billion in 2019.

In the fourth quarter, discounting all tax impacts from the balance sheet, net revenue rose 24.5%, compared to the last three months of 2019, to R$9.5 billion. The GMV of the last three months of the year was driven by online sales, which were up 110.5%, to R$5.66 billion. Gross sales in physical stores remained stable at R$7 billion – something that troubled investors in the Christmas preview, and not insignificant. EBITDA rose from R$625 million to R$709 million, and net income jumped from R$78 million to R$209 million, year-on-year.

The extras

In the year, Via Varejo’s positive tax impact stood at R$1.216 billion, of which R$447 million in the fourth quarter alone. “It is all final and conclusive. There is no risk of execution,” explains Orivaldo Padilha, Via Varejo’s vice-president of finance and investor relations.

The net impact on the annual balance sheet is less than the total – R$837 million – because the company conducted some contingency reinforcements in the period and made some additional provisions. Of the tax volume, more than 80% has a cash effect and in a period of up to two years.

GMV and Digital

The total sold on Via Varejo’s platform in 2020, the GMV (Gross Merchandise Value), reached R$38.8 billion, an increase of 21% compared to 2019. Of the total sold, 48.5% were online sales, both from Via Varejo brands and third parties, for a sum of R$18 billion – the volume includes products purchased online but picked up in-store. The share of digital sales in the total more than doubled in the annual comparison, from 23.9% to 48.5%.

“The potential for growth is still huge. If you think about it, before the pandemic, the Brazilian population buying online stood at between 6% and 7%. With the digitalization after the lockdown, this percentage may have reached 12%. But there is still 88% of the population outside the online market”, highlights Fulcherberguer.

According to the executive, Via Varejo had a market-share gain, in the sum of physical and online sales of 3.7 percentage points, going from 10.4% to 14.1%, in the year.

Via Varejo’s gross margin, an indicator that the market was very interested in checking the extent to which the logistics of e-commerce could harm profitability, rose from 28.6% to 32.8% year-on-year.

Online sales of products from the company’s brands alone posted a 174% increase in 2020 and totaled R$12.7 billion.

When asked, Fulcherberguer says that the fourth quarter performance is a good parameter, when the indicator stood at 30.5%. “If you think about it, the cost of online is already there, because half of what I sell is through the Internet. That’s a good benchmark for investor.”

The store seller’s share of digital sales, the “Call me on Zap”, launched by the company during the pandemic accounted for R$2.8 billion in sales in 2020 and, of this total, R$1 billion in the fourth quarter alone. In the last three months of the year, this channel accounted for about 21% of online sales.

Present and Future – same day is now 15%

Two weeks ago Via Varejo delivered one of its biggest promises: a new technological platform for sellers, that is, for retailers who want to sell in the group’s digital channel, the so-called market-place or 3P.

“I want to be the biggest marketplace in Brazil. It doesn’t matter if I need 80,000 or 90,000 sellers,” says the company’s CEO. “Now, in three minutes, any retailer can connect with me,” he explains. This was a bottleneck assumed by Fulcherberguer since he took over management in July 2019, with the departure of Casino from control, through Grupo Pão de Açúcar (GPA).

In 2020, the marketplace’s GMV totaled R$3.2 billion, with an increase of virtually 90%.

Logistics evolution encourages the executive, which, in his opinion, will make the difference in attracting new sellers to the platform from now on. He proudly says: “In February, 15% of everything I sell, I can deliver in less than 24 hours, it’s the ‘same day’. And I’m not talking about food, the ultra-light, I’m talking about refrigerators, televisions, large and heavy products. No one does that today in Brazil.”

Via Varejo had 3,000 partner sellers by mid-year in its marketplace. This total closed the year at 10.000 and, now in February, it has already reached 15.000. The company will run a broad advertising campaign, including TV ads, to attract new partners. There will be a three-month exemption of fees, in a super aggressive move by those who are, in fact, looking for their place in the sun, after organizing their place.

When the deadline is 24 hours, but changes to the next day, this percentage now reaches 42%, according to the executive. It is expected that this ‘same day’ structure will be available to partner sellers as of the second quarter of this year. Today, half of the marketplace customers use Envvias, a logistics system for third parties. This percentage is expected to increase considerably after the investments and improvements made.

Via Varejo will also make its stores available to sellers for stock allocation. The company has always emphasized that its units cover an average of 900 square meters, about 40% more than the competition’s average, and believes that this can be a differential.

For those who started the pandemic with 180 stores that operated as mini-hubs, Via Varejo closed 2020 with all its stores integrated in the omnichannel system, about 1,000 units, both for in-store pickup and last mile delivery.

Investments

With the comfortable financial situation since the public offering held last year, which raised more than R$4.5 billion, investments for 2021 will increase by about 50%, according to Daniela Bretthauer, who joined the company’s investor relations team in December 2020.

“We invested around R$400 million in the last two years. Now, we are going to spend about R$60 million,” says the executive. Of this total, 60% will be invested in technology. “We have changed levels.”

The company plans to open 120 stores throughout 2021. Of those, 15 were opened by February. Fulcherberguer explains that these units will all provide revenue expansion, because they will not share with other stores in the region. “They are all new plazas for Via Varejo.”

Crediário and banQi

Fulcherberguer also talked about the performance of crediário (payment in several installments), one of Casas Bahia’s legitimate technologies. “My stock grew in the pandemic, even with the stores closed, more than R$1 billion,” he highlights. The active volume in the company’s crediário stood at about R$5 billion at the end of 2019 and closed last year at R$6.4 billion.

“In addition, I have another R$11 billion in pre-approved credit,” he says. According to Via Varejo’s CEO, defaults are at their lowest level in the business’ history. Overdue installments for more than 90 days are currently equivalent to 4.9%.

Currently, a little over R$2 billion of crediário are in banQi, the fintech acquired by the group. “There are now over 1.8 million registered customers,” according to the executive. The total volume of payments made through this network reached R$300 million in the fourth quarter, 147% more than in the third quarter of 2020.

Source: Exame