Magalu Seizes Casas Bahia's Market as Sales Growth Hits 16% in October

By James Calloway

Magazine Luiza's sales growth accelerated to 16% in October, up from 8% monthly average earlier this year, as Brazil's second-largest electronics retailer captures market share from Casas Bahia, its main rival, now in judicial recovery.

The numbers tell a sharp story. Magalu's physical stores grew 10% year-over-year in the third quarter, to R$5.2 billion. From January to August, average monthly growth ran at 8%. September — the month after Casas Bahia filed for judicial recovery — lifted that rate to 12%. October pushed it to 16%.

CEO Frederico Trajano didn't mince words about the competitive shift.

"Houve descolamentos das placas tectônicas do varejo, impactando nosso principal concorrente e alterando o cenário competitivo do setor," Trajano said. "Isso criou uma oportunidade única e gigantesca de ganho de participação de mercado que, no cenário atual, mais do que protege a companhia das adversidades do cenário macro."

The gain, he said, is a "unique opportunity" that more than shields the company from an adverse macro backdrop of high interest rates and record household debt.

What do the Q3 numbers show?

Magalu posted a net loss of R$10.7 million in the third quarter. Strip out non-recurring items, and adjusted net profit reached R$13.9 million — a return to the black after two consecutive quarters of losses, the company emphasized. Debt fell to R$5.16 billion, down from R$5.95 billion a year earlier.

Shares closed up 4.1% at R$5.84 on Monday, though the stock remains down 34.06% for the year. It soared between the two rounds of Brazil's election, then plunged more than 58% the day after President Lula's re-election as investors priced in a tougher fiscal outlook.

How big is the Casas Bahia effect?

Casas Bahia accounted for nearly R$45 billion in sales last year and held 20% of Brazil's electronics and furniture market, according to Magazine Luiza. Its troubles have redirected demand fast:

• Magalu stores within one kilometer of a closed Casas Bahia saw sales double or triple versus branches without a nearby rival.
• Stores near a still-operating Casas Bahia grew sales nearly twofold, as the competitor's inventory shrank.
• E-commerce gained 1.5 percentage points of market share in just over a month.

Own-inventory e-commerce sales totaled R$5.9 billion in the quarter. After declining an average of 12% from January to August, they rose 5% in September and 14% in October.

The October disclosure covers the Magazine Luiza banner, which represents 75% of the business, and came with a material-fact filing — a step the company has taken only once before, in April 2020, when it announced sales growth despite pandemic store closures.

What drives the strategy now?

Magalu has dropped its ambition to be "the store of everything." Its business cycle, started this year, concentrates on categories where it leads: home goods and tech under Magalu, sporting goods at Netshoes, gaming hardware at KaBuM!, and beauty at Época Cosmétics. Logistics arm Magalog is central, with delivery costs for bulky items up to 50% below competitors, Trajano said. The company now aims to become the world's third-largest durables seller, behind JD.com and Best Buy, within its current five-year cycle.

It also expects "robust growth" for Black Friday and Christmas, though it gave no precise estimates. On the sports-betting ban, Trajano said it is too early to measure the impact. On the end of the 6x1 work schedule, a company task force is working "7x0" on the transition: "Minha premissa é não ter nenhum impacto financeiro nem nos centros de distribuição nem nas lojas," he said, adding retail associations are pressing the government for a longer transition window.

On the 2027 tax reform, Trajano called the final IVA rate, fully effective only in 2033, "negotiable," urging sector groups to deepen dialogue with government.