Retailers will benefit from recent stimulus measures. But it won’t last

The recent months have been brutal for Brazilian retailers on the São Paulo stock exchange. Double-digit inflation, continuously increasing interest rates, and high indebtment levels curbed consumption and eroded share prices. 

Magazine Luiza, a local behemoth, is perhaps the most glaring example, with a 92 percent slump between November 2020 — when Covid restrictions and stimulus programs boosted e-commerce — and July 1, 2022. 

But Magazine Luiza has seen its share prices go up by 25 percent since, in a movement that was also observed amongst its competitors. Over the month of July, the Icon B3 index — which tracks a broad list of consumer-related companies — rose by over 8 percent.

Analysts say these results are directly linked to the recent measures sponsored by the government and approved by Congress which are aimed at lowering the cost of essential goods and services, such as fuel and energy, and boosting social policies. 

Since the start of July, gasoline prices are down by over 19 percent, per the National Oil Agency. An approved 50 percent bump on payments of the government’s flagship cash-transfer program only kicks in next week. 

“In a way, these measures mean more money entering the economy, which creates an expectation of an interesting near future for retail, especially after a first semester in which the sector suffered a lot,” says Matheus Lima, an analyst at Top Gain, a São Paulo-based market analysis platform.

Estimates from a national retailers’ association suggest the recent stimulus moves should inject BRL 16.3 billion (around USD 3 billion) into retail, as low-income populations could see a 3 percent bump in revenue overnight. Supermarkets...