The numbers reported by Lojas Renner (LREN3) this Thursday (4th) were considered strong and above market average forecasts, with the retail division being the main positive highlight.
“Lojas Renner presented very good results in 2Q22, which were above our forecasts and consensus. Retail sales growth compared to 2019 showed good sequential acceleration to 57%, while G&A levels, which have been the main point of concern in this case, came in good shape, supporting a healthy retail adjustment.” , analysts at Credit Suisse commented in a report.
In addition, the Swiss bank believes that net income of R$360.4 million, above its projections of R$280 million, should lead to a positive review of earnings and, therefore, justify a positive reaction of shares on the trading floor of this year. Friday (5th).
The shares registered volatility throughout the day, rising 3.72% at the high of the day and falling 5.52% at the low, closing down 2.76%, at R$ 27.47. It is worth mentioning that in the week, until the day before, the assets accumulated gains of 11.7%, having registered four highs in a row.
Bradesco BBI’s research team classifies Lojas Renner’s results as strong, despite the deterioration in the quality of assets in Financial Services. According to analysts, the most important point was the strong acceleration in revenue compared to 2019, which is likely to be the fastest acceleration among the bank’s entire Apparel and Footwear coverage.
For Morgan Stanley, the retailer’s sales were favored by the continued momentum of reopening the economy, providing a favorable wind for apparel demand. However, the bank points out that the basis of comparison for Renner’s retail sales becomes more difficult in the second half of the year, and sees continued high inflation as a potential obstacle to discretionary retail sales.
On the negative side, Realize fell short of BBA’s expectations, with earnings before interest, taxes, depreciation and amortization (Ebitda) falling 77% year-on-year due to higher provisions and lower coverage ratio. But, according to a report by Credit Suisse, the below-consensus financial results were not enough to overshadow the robust performance at the core.
BBI also points out Financial Services as a negative highlight in Lojas Renner’s balance sheet, due to the increase in delinquency and provisions.
On the other hand, the company has been reaping benefits from the most recent initiatives to contain the impact of deterioration in asset quality. In addition, BBI analysts point out that delivery times are improving and delivery costs are falling. In this way, they believe that the result presented helps to strengthen the margin recovery thesis, which is the big issue that worries investors since the decision to reduce margins in early 2021.
On the operational front, according to Credit Suisse, the results showed good general signs. “Two of them best demonstrate the strength of operations this quarter: (1) strong sales performance combined with very good work on retail gross margin levels both supported by solid execution; (2) solid indications of the digital economy: Online gross trading volume (GMV) has grown and cost per shipment has dropped – the combination of faster delivery and better unit savings naturally bodes well for a dynamic healthier profitability in the future.”
While first-half results were strong, demand reversal risk and associated margin winds in the second quarter led Morgan Stanley to maintain its rating. underweight (sales equivalent) to Lojas Renner, with a target price of R$ 30, a upside (potential for appreciation) of 6.2% compared to the closing price on Thursday (4) of R$ 28.25.
Bradesco BBI, on the other hand, is more optimistic and has a recommendation outperform (equivalent to purchase) and target price of R$40, upside of 41.6%.
While Credit Suisse and Itaú BBA remain neutral in name, with a target price of R$43 and R$27, in that order.