Company News

UPDATE 1-Brazil's Magazine Luiza profit falls after margin trade-off to boost sales

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SAO PAULO, Feb 17 (Reuters) - Brazilian retailer Magazine Luiza 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.

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

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