Magalu: products will be more expensive on the website than in the store – 05/16/2023 – Market

The CEO of Magazine Luiza, Frederico Trajano, said this Tuesday (16) that the prices of physical stores should become more attractive compared to those of ecommerce.

During the retailer’s results conference call, Trajano said that this will happen because the return of the Difal ICMS (difference between the tax at origin and destination) for interstate operations since the beginning of this year forces the transfer of prices to the consumer for online purchases.

According to Trajano, this price differentiation between physical and online stores has not yet appeared in the company’s first quarter results, but should have an effect on the next balance sheets. “I see potential for this to materialize in the coming quarters,” he said.

The reintroduction of the tax comes at a turning point for Magazine Luiza. In the first quarter, for the first time, sales volume in the marketplace surpassed that of physical stores. In this environment, the Difal charge affects the retailer in full.

Although Magalu is transferring prices to the consumer, Trajano said that this transfer is below competitors.

The company’s first-quarter results and earnings call did not go down well with investors. Around 11:50 am, Magalu’s shares fell 15.98%, to R$ 3.68.

This Monday (15), the company reported an annual increase in its loss, which reached R$ 391.2 million in the first quarter, while in the same period of the previous year the loss was R$ 161.3 million. The company justified that the result was influenced “mainly by the reintroduction of Difal and by the increase in financial expenses in the period”.

In the conference call, Trajano pointed out that, although the macroeconomic scenario remains challenging, with high interest rates, which increases the retailer’s financial expenses, operationally the company delivered good results in the first quarter.

The executive highlighted some of the company’s record numbers, such as the level of market share, which grew by 6 percentage points, in addition to the increase in sales in all the company’s channels.

RETURN OF DIFAL

Difal was a tax created in 2015 to balance the receipt of ICMS between the states involved in the transport of goods, so that the collection is not concentrated only in the place where the selling company is headquartered. The taxation came along with an increase in online shopping and the consequent growth of retailers’ interstate operations.

But companies contested the lack of a complementary law to regulate the collection of the tax. As a result, the STF (Federal Supreme Court) decided to suspend the collection of this tax in 2021 until there was this complementary law, which was published in January 2022 and became valid in early 2023.

There is still a discussion in the Judiciary about when the collection of this tax should begin, whether in 2022, as the States defend, or in 2023, as companies want.