Magalu (MGLU3) reverses losses, profits R$ 27.9 million in the 1st quarter with a focus on profitability

Magazine Luiza (MGLU3) made a profit of R$27.9 million in the first quarter of 2024 (1Q24), reversing the loss of R$391.2 million recorded in the same period last year.

In part, the improvement in the last line of the balance sheet follows the 3.1% increase in total sales on the same basis, reaching R$16.02 billion. In adjusted terms, the retailer went from losses of R$309.4 million in 1Q23 to a profit of R$29.8 million in 1Q24.

Those who drove the advance in growth between January and March this year compared to 2023 were mainly physical stores, whose sales rose 8%, reaching R$5 billion. At the e-commerce (1P), digital sales of own products grew 1% on the same basis, totaling R$ 11 billion, and in marketplace (3P), where Magazine Luiza makes its platform available to third parties, sales also reached around R$5 billion, an increase of 6%.

In an interview with InfoMoney, Vanessa Rossini, director of investor relations at Magalu, explained that the company’s vision is that ‘demand is returning’, but not necessarily driven by cheaper credit. “This consumption is accelerating without credit returning. We are gaining market share. When credit comes back, we should see even more improvement,” she says.

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The retailer’s gross revenue grew 1.9% in the year, to R$11.5 billion, as well as net revenue, which was R$9.2 billion. “It is worth highlighting the 10.5% increase in service revenue, with emphasis on the growth in revenue from the marketplace and insurance sold in stores”, explains the company in the document published on Thursday night (9).

Magazine Luiza mentions that the advancement of services offered in marketplace was still the main responsible for the growth in gross margin, which reached 29.9%, compared to 27.3% in the first quarter of 2023. Other than that, the gradual transfer of Difal over the last year is also mentioned as a driver from the margin.

Magazine Luiza advances in margins – which continue to be the focus

On the spending side, the retailer saw its operating expenses increase by 3.1% in the year, reaching R$2.08 billion. However, the increase ended up being diluted due to higher revenue. The Ebitda margin (Earnings before interest, taxes, depreciation and amortization) rose from 4.9% to 7.4% and Ebitda itself increased 111.3% in the year, to R$ 684.9 millions. Adjusted Ebitda grew 54%, representing R$688 million.

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The retailer’s director also points out that increasing profitability continues to be Magazine Luiza’s focus in 2024.

The retailer also had its balance sheet benefited by the advancement of its financial arm, with Luizacred bringing a net profit of R$13.4 million, reversing the negative balance from a year before.

Magazine Luiza, finally, recorded a negative financial result of R$383.4 million, a figure lower than the losses of R$632.4 million in the same period in 2023. “Financial expenses reduced by 2.9 percentage points due to the evolution of cash flow from operations, improvement in the capital structure and reduction in interest rates, in addition to the proportional increase in sales in the marketplace, since this channel presents lower related financial expenses”, he explains.

The company ended March with a net debt of R$4.3 billion, lower on an annual basis. At this point, Vanessa Rossini draws attention to the company’s operating cash generation, of R$2.7 billion in the last 12 months, and this quarter’s operating cash flow, which was almost zero, despite seasonality.

Regarding the tragedy in Rio Grande do Sul, the director of investor relations at Magazine Luiza mentioned that it is still too early to set expectations. The retailer has around 100 stores in the region, six of which are closed, compared to a total of more than 1,300 units.

“Mathematically, it doesn’t seem so relevant, material. It’s still too early to talk about less traffic in stores in the South. But we’ll continue monitoring to see the next steps,” she says.