HOLY DOMINGO. – The dispute over retail giants about the purchase of Netshoes finally announced its winner last Monday (29). Luiza magazine won the competition, but still has a great challenge to win: demonstrating that it can stop Netshoes bleeding, which has never been profitable, and use the company to be relevant in the fashion retail market.
The entry of the magazine for the sale of clothing and footwear was considered a natural step for the company. Experts believe that the fashion segment is the field of the next big battle in e-commerce. Magazine, who has recently started selling books, has declared plans to become the largest e-commerce in the country.
Unlike other industries, where it was associated with the industry to start selling products, Magazine had a short cut in the case of retail fashion, with a cost of 62 million dollars, buying Netshoes . In addition to the sporting goods brand, Netshoes owns the Zattini fashion brand and Shoestock women's shoes.
For analysts, investors and consultants consulted by InfoMoney, the agreement should not be an important revolution in its structure, but could place the company ahead of the competition in this market.
"The business of Netshoes connected to Magazine Luiza is perfectly understandable. All the administrative and physical structure that Netshoes had to bring to the back is only in the magazine. The costs will be diluted," explains Henrique Bredda , partner of the management of Alaska Asset and one of the main shareholders of Magazine Luiza in recent years.
The synergy of the companies of Magazines and Netshoes goes through some common points in retail mergers, such as the integration of platforms, infrastructure and people. According to a person linked to Luiza magazine, Marcio Kumruian, current president and founder of the sports retailer, should continue to the company.
Graziela Kumruain, director of operations of Netshoes and sister of Marcio, will continue to manage the company, according to the source. If, on the one hand, the experience of Marcio and Graziela in the clothing and sports trade can be beneficial, on the other hand, it can alter a major change in business direction.
"The problem is that the leader of Kumruian is an entrepreneur who wants to grow the company at any price. Magazine is the head of a public company, which must provide quarterly results after quarter "says an industry executive.
In spite of the differences, the consultants think that the history of acquisitions of Magazine can help the company in the challenge to integrate a business of beginning in the real world of the retail trade. "The magazine has so much experience in the acquisition of physical retail as in the digital. Integrations have always focused on people and have been very well done," says Marcos Gouvêa, director of consultancy GS and MD Gouvêa de Souza.
According to InfoMoney, Magazine should be part of the Netshoes technology team. "Luiza magazine usually does not make acquisitions or rule out everybody. Netshoes has a strong developer base that should be absorbed by the magazine," says a source close to the retailer. Dear Luiza magazine did not do an interview.
In the field of logistics, Magazine is known to effectively use the "Malha Luiza" and its network of stores to deliver products and reduce costs with the transport of merchandise. InfoMoney has determined that the company plans to keep the three distribution centers of Netshoes open (in Minas Gerais, Pernambuco and São Paulo). The centers should be integrated with the other 12 of Magazine Luiza.
Another important step in the integration should be the cross-sale of different products from Netshoes to Magazine Luiza, both in the digital world and in the physical world. For retail sale, the magazine must allow Netshoes customers to search the site and retreat their products to around a thousand stores.
With this integration, Netshoes would have access to a larger store network than any of its competitors. Centaur, for example, has around 180 stores throughout the country. Outside the sports category, Renner has 550 stores.
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Another synergy is the base of 6 million active Netshoes clients, which should be added to the 17 million magazine. "Although there is an overlap between branded customers, 6 million Netshoes will provide a huge database of the magazine with many relevant consumer habits that should help improve the Magazine business," says the retail consultant Ana Paula Tozzi, from AGR Consultores.
Is the distraction of Netshoes?
The challenge is to make this integration without losing focus and maintaining accelerated growth, which has been the brand of Magazine and who likes its investors.
Along with the announcement of the purchase, Netshoes presented its balance sheet, which shows that the loss doubled in 2018 and that the company burned $ 100 million in cash. The growth of Netshoes also slowed down last year, despite its reputation for aggressive growth strategies.
"The injury has always been a problem in Netshoes. But now the company has no cash to pay off in the short term. It is a company that could break if it was not sold," says an e-commerce consultant.
"The UGLG [Magazine] Consistent organic growth and acquisition could cause distractions, especially due to the financial and operational difficulties of NETS [Netshoes]"Itaú BBA analysts inform." If the performance of the organic growth of Magazine Luiza is the best of the class, why distraction? ", Add.
From the cash point of view, Magazine seems to have a lot of money to liquidate Netshoes operations. In addition to the approximately $ 240 million that will be made with the company, the retailer will continue to assume the debt of R $ 140 million. In the box, Magazine has approximately 2.2 billion dollars.
In a report, analysts at Bank of America, Merrill Lynch, point out that, despite the loss of profit, the gross margins of the categories in which Netshoes operates are greater than those of the traditional retail trade of Magazine Luiza . "We see a path to profitability," analysts said in the report.
The shares of Magazine Luiza (MGLU3) closed on Tuesday with an increase of 7.14%. Listed in R $ 191.26: the highest level for all time. Investors trust that the company will win its most recent challenge.
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