Business

Magazine Luiza: why this big retailer is the sweetheart of investors in Brazil

The company had registered ten consecutive quarters of 50% or more of growth

the brand of a brazilian store called magazine luiza
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  • The company reported a net income of $ 97.02 million (BRL 386.6 million) between April and June in 2019, up 174.7% from a year ago;
  • Looking closely, the company’s attention to its resources and the management of its talent has been critical in its success;
  • For analysts and experts, what makes Magazine Luiza exceptional is that the company has been able to bet heavily on digital transformation while maintaining a growth pace, something rare among Latin American retailers.

It’s “deca,” the way that Brazilians say “ten times a champion.” That was the way that Magazine Luiza – one of the biggest Brazilian electronic and appliance retailers – announced its second quarter results on its social networks this week. The company had its tenth consecutive quarter of 50% or more increase in growth. 

The company reported a net income of $ 97.02 million (BRL 386.6 million) between April and June in 2019, up 174.7% from a year ago – if  items like tax credit, provisions, and the acquisition of online shoes retailer Netshoes are not taken into account, the net profit of the company would have been lower, around BRL 108 million, a drop of 23.9% from a year ago. And that would not exactly be a problem, since during this same period last year, the company had a television sales boom driven by the FIFA World Cup.

“We are focusing on our marketplace to deliver a Chinese-like growth in e-commerce,” said the CEO Frederico Trajano in a call to discuss quarterly earnings, according to Reuters. But these amazing financial results are not the only reason why Magalu – the short name by which the company is known in Brazil –  has become the sweetheart of investors and entrepreneurs in the country.

The company is considered to be the best bet in the Brazilian Stock Exchange today, according to a rank made by the business and financial portal Infomoney alongside Ibmec, a research institution focused on capital markets and based in Rio de Janeiro.  Magalu turned out to be the best among the listed companies in Brazil in three evaluated criteria: profitability, stock performance, and corporate governance.

For analysts and experts, what makes Magazine Luiza exceptional is not only that the company has grown in the midst of the crisis in recent years – the worst the country has ever experienced – but because the company has been able to bet heavily on digital transformation while maintaining a growth pace, something rare among Latin American retailers.

Looking closely, the company’s attention to its resources and the management of its talent has been critical in its success. One of Magalu’s latest actions led by the chairwoman of its board Luiza Trajano, and which reflects this compassionate approach to its talents, is the launch of a booklet on how companies can address the problem of violence against women in the country and put in place mechanisms to effectively help employees in this situation. The material may even be used by other companies.

In the call with analysts, Frederico Trajano said that Magalu is focused on the growth of their marketplace platform and its application to their customer base, and also concentrated on improving the quality of logistics services. The Magalu CEO also said that now that the second quarter is finished and that the company has achieved amazing results, he believes that 2019 will be a milestone for the company.