There is no denying that Asian e-commerces have won the hearts (and pockets) of Brazilians. When asking where a person bought a certain item, it is common to get one of these three answers: AliExpress, shopee or Shein.
“Darlings” of the public because of their affordable price and because they have a multitude of “fashionable” products and clothes, gringo retailers can even be good to spend their money on online shopping.
But if you want to have the opportunity to make money with retailis a Brazilian company that needs to get on your radar.
Unlike Shopee, Shein and other international e-commerce giants, this company has a strong presence of physical stores, which are spread across practically all of Brazil.
In addition to being a consolidated brand in the country, with 60 years of existence, it dominates its segment, with 16% of market share (market share). To give you an idea of how much this means: your main competitor had only 2.1% of market share in 2020.
Now, an ambitious retail expansion plan could enable the company to unlock even more value for its shareholders. According to forecasts by analyst Rodolfo Amstalden, founding partner of Empiricus Research, this Brazilian retail action could go up 50% in the medium to long term.
This company may not even be your first choice when shopping on the internet, but it has a potential for appreciation that can transform your heritage.
And you will understand better why.
Shops, shops and more shops
Forget the online business model of Shopee, Shein and AliExpress. Let’s think of a “traditional” retailer, with a strong physical presence. In this scenario, the more stores across the country, the better for her, right?
And this is exactly one of the biggest attractions of this company: present in the market for more than 60 years, it is in 38% of Brazilian malls.
This alone would be an interesting metric. But of course there’s no point in having many stores if they don’t make a profit.
The luck of this retailer is that the your stores are very profitable: on average, a mature store of the brand earns between R$ 7 million and R$ 8 million per year. Its best units produce a return on invested capital (ROIC) in the home of 40% per year. The worst, around 30%.
In addition, its payback (average time to recover the investment) is one of the fastest in Brazilian retail: in 12 to 18 months, new stores have already “paid for themselves”.
In other words: we are talking about a company that knows what it is doing. After all, how many Brazilian companies do you know that managed to “survive” for six decades in the difficult and challenging Tupiniquim market?
That is why its expansion plan is being seen by analyst Rodolfo Amstalden as something extremely promising. By 2026, the brand wants to reach 50% of Brazilian malls, increasing its penetration in smaller cities.
With stores, stores and more stores, it is very likely that the company will be able to add even more value to your businesswhich, by itself, is already well consolidated and resilient ‒ thus justifying the 50% high projection for its share.
Shopee and Shein are ‘newbies’; this Brazilian retailer is located in one of the oldest markets in the world
In addition to a relevant physical presence, the retailer has another point that is playing in its favor, putting it at an advantage over e-commerce “newbies”: the market in which it operates is extremely resilient.
We are talking about a segment that has existed, albeit informally, for centuries, since the time of empires and monarchies. A segment that basically has constant demand ‒ and does not depend on a TikTok “trend” to sell.
So much so that this market in question grows 5% per year, historically. “If market growth helps, it is the differentiated execution capacity of the company that makes it stand out”, comments Rodolfo Amstalden.
As already mentioned, the retailer is a giant in this market, with market share 16% ‒ while its main competitor had only 2.1% in 2020. It can be considered a “top of mind” company (the first company that comes to your mind when you think about the industry it is in).
And that’s not just a “cute” piece of data to illustrate PowerPoint presentations. That’s worth money.
“In a sector where being ‘top of mind’ is a fundamental factor in attracting and retaining customers, the size of the company seems to us to serve as a factor that reinforces, every year, its ability to grow at a faster rate than the rest of the industry,” says Amstalden.
It is no wonder that it is so relevant in terms of market share and has delivered such consistent results.
Now, with its expansion plan to 50% of Brazilian malls, we can expect even greater cash generation for the company. She’s already giant. And wants to grow even more. This is great for you as an investor.
Online shopping is cool, but physical retail still has its glamor
And before you think physical retail is past, it’s good to take a look at the data. Yes, shopping online is more practical. But in-person shopping in stores has not “died”. So much so that, in the first half of this year, sales from physical stores grew in Brazil, according to data from the Sociedade Brasileira de Varejo e Consumo (SBVC).
For the retailer recommended by Amstalden, digital is an essential and complementary tool. But its main bet remains the “eye-to-eye”. “The company’s strategy will follow the same: a lot of investment in the brand with a focus on generating traffic to the stores”, explains the analyst.
Because the company managed to resist even the pandemicone of the biggest blows to physical retail in recent decades.
Even with all malls closed around the country, its sales exceeded R$ 1.3 billion, representing a drop of only 10.2% compared to 2019. Meanwhile, its segment as a whole fell 20%.
Its gross margin, historically 70%, dropped just 2 percentage points, and ended the worst pandemic year at 68%. And she still got it R$ 200 million of free cash generationeven facing the worst crisis in its history.
“In my opinion, 2020 brought real implications to the investment thesis, as it made investors realize that there is something in particular that has made the retailer survive and thrive since 1962”, comments Amstalden.
You can continue shopping at Shopee and Shein, but don’t let this investment opportunity pass you by.
The “opera summary” is as follows: at this very moment, there is a company listed on the Brazilian stock exchange that is a reference in national retail and can deliver up to 50% appreciation for its shareholders.
After proving her resilience to the pandemic and resuming an ambitious national expansion plan, she has buy recommendation of the founding partner of the largest independent financial analysis house in the country.
But if you’re still not fully convinced of the potential size of this retailer, no problem. I know that, in order to make an investment decision, it is necessary to go beyond just a story on the internet.
It is for this reason that I strongly recommend that you access the full report written by Rodolfo Amstalden. There he reveals the action name and ticker and explains in more detail why he believes the company can deliver profits of up to 50% to investors.
The report is being made available free by Empiricus Investimentos to all interested parties who click on the button below:
Don’t worry: you can continue shopping on Shein, Shopee and AliExpress while you look for gains from this Brazilian retailer action.