Magalu (MGLU3), Via (VIIA3), Americanas (AMER3): With the World Cup at the end of the year, 4Q retail outlook divides analysts
The fourth quarter of the year is usually the strongest period for a retail company, be it in the home appliance, apparel or even consumer staples sectors. Black Friday, Christmas and New Year’s are usually the dates that lead people shopping, in the midst of gatherings. In 2022, another major event, the World Cup, takes place for the first time in the same interval – and its proximity to the others divides analysts’ perspectives.
The World Cup usually also tends to be a sales boost for retailers. People buy new TVs to watch matches, look for team jerseys and spend in supermarkets to watch group matches.
However, for the analyst he heard InfoMoneyand who wished to remain anonymous, the word that defines the end of the year for traders is “uncertainty”.
“If you look at the year-end calendar, Brazil’s first game at the World Cup is on the eve of Black Friday. The second game will be on Cyber Monday. Therefore, the scenario is uncertain,” he explained.
CONTINUE AFTER AD
According to him, there are two main factors clouding what the end of the year will be like for companies like Magazine Luiza (MGLU3), Americanas (AMER3) and Via (VIIA3): commitment to revenue and fewer people on the streets between games.
“A person who would buy a TV in the middle of the year, because of the World Cup, might not buy it this year. Maybe Black Friday is waiting. But maybe the purchase on Black Friday could be jeopardized because she got the TV a little earlier, for games,” contextualizes the analyst.
A longer gap between the World Cup and Black Friday would theoretically give people more time to “recover” from purchases made for the FIFA World Cup. With proximity, it is possible that the available money that people have to spend on all events will be less.
Spending split between spending and experiences
Nevertheless, in this sense, it is possible that a larger part of the income, during the World Cup, goes to “experiences”, whereby the population spends more when going to bars, for example.
“Recently we talked to some retail players. One of them said that CVC Brasil (CVCB3) has been its main competitor for some time. “People are spending more on travel and experiences than on consumer goods, and the World Cup could amplify that,” he says.
CONTINUE AFTER AD
Consumer staples retailers, such as supermarkets, could benefit on this front as people prepare for more indoor events.
“The sector’s share of consumer spending is more unclear. People spend more on services, experiences, bars. And that can be reinforced during the World Cup”, contextualizes the analyst.
On the other hand, a sporting event also tends to take people off the streets. According to research conducted by XP Investimentos, using data from SPTrans, in 2018, the year of the last World Cup, the movement of people in the city of São Paulo dropped from 20% to 25% on match days in Brazil, which directly affects the flow of physical stores.
Something similar, according to the broker, is happening on the Internet, where the presence on the site is also threatened.
In the report of shopping centersMorgan Stanley defined the decline in the presence of people in physical stores as the “Neymar effect”.
“The logic goes this way: 40% of many retailers’ annual sales occur during the year-end shopping period. When Brazil plays, traffic drops by about 50%. So, if Brazil goes through the group stage (probably) and starts playing on weekends, there is a certain danger,” defends the US Bank team led by Nikolaj Lippmann.
Wagner Chavez, partner and equity analyst at SFA Investimentos, follows the same path.
“If, on the one hand, the World Cup focuses people’s attention on the sporting event, reducing traffic even on websites and digital applications, at the moment there is a great demand to buy new TVs, which can help increase the sales of some companies,” he argues. . “But we’re concerned that the people’s share of the budget is too high, so it’s generating less sales than if the events were on different dates.”
Ricardo Borges, from the same house, claims that in the clothing sector, despite the lower flow in stores, it is expected that the planned purchase will not stop flowing, due to the festivities.
CONTINUE AFTER AD
“In addition, there are several matches or potential matches in Brazil that fall on days of the week that are really relevant to the category (one of them is just the final, if Brazil gets there),” explains Borges.
Proximity to the event may disappear due to the longer extension of Black Friday
Despite the proximity of the Black Friday Cup, for example, the perception of analysts is also that in Brazil the offer of this event has been expanded.
“Here in Brazil, Black Friday becomes Black Week and even Black Month,” says Heitor de Nicola, equity advisor at Acqua Vero Investimentos. “According to Abcomm research [Associação Brasileira de Comércio Eletrônico]The World Cup, together with Christmas and Black Friday, should inject about R$ 20 billion into the economy”.
For experts, sectors such as food retail and sportswear may get a boost during Black Friday, with people using the period to prepare for the World Cup.
“We don’t see, because of the games, a strong connection in the decline in sales. In the pandemic, while retail was closed, we already had online shopping. E-commerce has strengthened and, although physical stores have partially recovered, shopping should continue,” says Nicola.
In any case, the outlook for most analysts is that sales will be strong – with the problem being more revenue split between different sectors.
Recent deflation, falling unemployment and the existence of a small part of pent-up demand during the pandemic could make the scenario more favorable for retailers. In addition, the possible end of the cycle of high interest rates is viewed with optimism.
“Many people lost their jobs, had to move. So, they still did not consume what they stopped consuming during the pandemic. Another thing is that we had a big rise in prices with inflation, and now, when inflation has come down a bit and prices are back to normal, people tend to spend a little more,” points out Rodrigo Cohen, co-founder of Escola de Investimentos.
CONTINUE AFTER AD
XP Investimentos, in a report on the subject published in August, also highlighted doubts, with “different effects between categories”.
“Durables and TVs are likely to gain share, consumer discretionary businesses dependent on people movement may face off, and food retail will benefit from higher demand for match-day items in Brazil,” said analysts at the broker, led by Danniella Eiger. “However, the more widespread Black Friday sales, with tighter consumer budgets and holiday celebrations, could partially moderate the effect of this overlap. Therefore, we see Grupo Mateus (GMAT3) and Assaí (ASAI3) as the best positioned, while Magalu, Via, Multilaser (MLAS3) and Alpargatas (ALPA4) may have high risks”.