Brazil's Magazine Luiza profit falls after margin trade-off to boost sales (updated)

Lifeist Wellness

17/02/2020 12:07

(Adds details)
    By Gabriela Mello
    SAO PAULO, Feb 17 (Reuters) - Brazilian retailer Magazine
Luiza SA  MGLU3.SA  on Monday reported a 11.4% drop in
fourth-quarter net income year-on-year, as the group took a hit
on margins to achieve record total sales growth.
    The company's fourth-quarter net profit was 168 million
reais ($39.1 million) compared with 189.6 million reais in the
same period a year ago, while net margin fell to 2.6% from 4.1%.
    Magazine Luiza, one of Brazil's biggest retailers, reported
adjusted net income of 185.3 million reais, 0.5% lower than the
fourth-quarter of 2018, excluding non-recurring items and the
adoption of new international accounting standards known as IFRS
16.
    "The company will continue to trade off margins in the
short-term whenever this is in line with its strategy to secure
better results in the long-term," it said.
    For 2020, Magazine Luiza plans to focus on the integration
of recently acquired businesses, including online sports
retailer Netshoes Ltd bought in June 2019 for $114.9 million.
 urn:newsml:reuters.com:*:nL2N23L0TY
    Separately, the company said on Monday it has completed the
acquisition of online book seller Estante Virtual for an
undisclosed amount, a deal that industry experts see as an
effort to take on Amazon.com  AMZN.O .  urn:newsml:reuters.com:*:nE6N29T00U
    Magazine Luiza, which sells electronics, home appliances,
cosmetics and other goods, has successfully shifted from a
brick-and-mortar chain into a tech-savvy retailer in recent
years.
    The company reported total sales of 8.988 billion reais in
the fourth-quarter, a 51.3% jump from a year ago, marking its
best performance in its history. 
    Net revenue grew by 38.5% year-on-year to 6.385 billion
reais, while operating expenses climbed by 50.6% to 1.449
billion reais.
    Earnings before interest, taxes, depreciation and
amortization, a gauge of the company's operating performance
also known as EBITDA, increased 41.2% year-on-year to 499.1
million reais. Analysts, on average, expected an EBITDA of 466
million reais, according to Refinitiv data.
    ($1 = 4.2981 reais)

 (Reporting by Gabriela Mello; Editing by Toby Chopra and Jane
Merriman)
 ((Gabriela.Mello@thomsonreuters.com; +55 11 5644 7553; Reuters
Messaging: gabriela.mello.reuters.com@reuters.net))