Magazine Luiza - Q1 2026 Earnings Analysis

Performance Highlights

Magazine Luiza reported total sales of R$15.2 billion in Q1 2026, a 5.6% decline versus Q1 2025, with net revenue of R$9.2 billion falling 2.0% year-over-year and adjusted EBITDA of R$717.6 million delivering a 7.8% margin, 30 basis points below the prior-year period. The adjusted net loss of R$33.9 million, against a R$11.2 million profit in Q1 2025, reflected surging financial expenses of R$568.7 million as the Selic rate climbed from 12.25% to 15.0% over the period.

Physical stores were the standout operational driver, growing total sales 6.9% and same-store sales 6.4%, while total e-commerce contracted 11.0% as global memory chip cost inflation suppressed demand in smartphones, TVs, and IT hardware. Gross margin nonetheless expanded 20 basis points to 30.8%, supported by CDC portfolio growth — up 18.0% to R$1.8 billion — and Luizacred's R$75.1 million net income, while selling expenses as a percentage of net revenue improved 20 basis points to 18.5%.

Management Outlook and Forward Catalysts

Management framed Q1 2026 as a transitional milestone, signaling the start of a new strategic cycle built on the maturation of MagaluPay SCFI — which surpassed 90% of CDC production by April — and the issuance of its first CDBs, with April funding reaching R$145 million. The World Cup provides a near-term demand catalyst across TVs, audio, and apparel, with Magalu mobilising its full ecosystem across Magalu, Netshoes, and its supermarket segment.

The central investor debate for Q2 centres on whether physical store momentum and World Cup-driven electronics demand can offset persistently high interest costs that consumed 6.2% of net revenue this quarter, and whether MagaluPay SCFI's funding ramp is sufficient to sustain CDC growth without pressuring Luizacred's delinquency ratios, which — while improved at NPL 90 of 7.2% — remain a key watch item in a 15% interest rate environment.