Magazine Luiza swings to second-quarter loss on e-commerce slump
The Brazilian retailer reported a second-quarter adjusted net loss as it deliberately sacrificed online market share to protect margins amid high domestic interest rates.
Magazine Luiza reported an adjusted net loss of R$50.4 million (US$9.9 million) for the second quarter, reversing an R$1.8 million profit from the same period last year. The statutory net loss widened to R$72.5 million as debt servicing costs rose in Brazil’s high interest rate environment.
Net revenue declined to R$8.898 billion from R$9.134 billion a year earlier. Despite the top-line contraction, the gross margin expanded slightly to 30.6 percent, reflecting the company's deliberate shift away from heavy discounting.
The revenue drop was driven by an 11.9 percent year-over-year decline in e-commerce sales and a 12 percent drop in online gross merchandise value. Conversely, physical store sales rose 10.3 percent as consumers returned to brick-and-mortar locations and the retailer scaled back digital promotional spending.
Executives framed the results as a strategic growth reset focused on profitability rather than volume. The chief executive stated the company is not chasing market share at any cost, prioritizing profitable sales and higher-margin categories like furniture and appliances.
The chief financial officer noted the retailer is doing everything to return to profit without depending on interest rates. High benchmark Selic rates continue to pressure consumer credit demand and inflate corporate borrowing costs across the broader Brazilian retail sector.
Management is actively renegotiating supplier contracts and reducing overhead to offset the revenue shortfall. The company also continues to invest in logistics and fulfillment centers, which currently weigh on short-term profitability but aim to improve delivery infrastructure.
For the first half of the year, the statutory net loss widened to R$127.68 million on total sales of R$18.104 billion. Analysts at Safra noted that disciplined expense control helped mitigate the revenue decline, viewing the slight gross margin expansion as a positive indicator.
Looking ahead, guidance for the remainder of 2026 emphasizes improving return on capital rather than aggressive expansion. Management reiterated its projection for full-year positive free cash flow and expects e-commerce volumes to stabilize as operational adjustments take effect.
