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    MGLU3   BRMGLUACNOR2

MAGAZINE LUIZA S.A.

(MGLU3)
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Magazine Luiza S A : 2Q20 Earnings Release

08/17/2020 | 06:23pm EDT

August 17, 2020

Magazine Luiza S.A. (B3: MGLU3)

2nd Quarter 2020 Earnings Release (IFRS Equivalent)

2Q20 HIGHLIGHTS

Total sales rose 49% in 2Q20, growing 85% in Jun/20

E-commerce grew 182%, reaching R$6.7 billion and 78% of total sales

Marketplace grew 214%, reaching 27% of total e-commerce

Cash from operations reached R$2.2 billion in 2Q20

Net cash rose to R$5.8 billion in Jun/20

  • Higher growth than before the pandemic. In 2Q20, total sales, including physical stores, traditional e-commerce (1P) and marketplace (3P) grew 49.1% to R$8.6 billion. This reflects a 181.9% increase in total e-commerce sales. Despite the fact that an average of 64% of stores were closed during the quarter, physical store sales fell only 45.1%. In Jun/20, with 64% of stores reopened, total sales growth was 85%. This historic growth enabled the Company to surpass its competitors during the quarter to become the sector sales leader for the first time in its 63 year history.
  • E-commercegrew approximately three times the market rate. Boosted by pandemic inspired consumption habits, formal e-commercein Brazil grew 70.4% in 2Q20, according to E-bit.Even with such a high market growth rate, Magalu distinguished itself, growing 2.6x times the market rate to assume the formal e-commercelead. During this period, the Company's e-commercesales advanced an expressive 181.9%, representing 78.5% of total sales. In traditional e-commerce(1P), sales increased by 171.5% and the marketplace grew 214.2%, contributing an additional R$1.8 billion in sales. These marketshare gains were driven in large part by the excellent performance of the app, which has already reached the important milestone of 30 million monthly active users. Other contributing factors include an increase in the number of marketplace sellers; faster delivery speeds, and the growth of non-traditionalcategories, such as apparel (Netshoes), cosmetics (Época Cosméticos) and groceries.
  • Gross margin reflecting the greater participation of e-commerce.With the temporary closure of stores and the increase in e-commerceas a percentage of total sales from 41.5% (2Q19) to 78.5% (2Q20) the adjusted gross margin decreased from 29.3% (2Q19) to 25.8% (2Q20). With the progressive reopening of stores in Jun/20, gross margin rose to 28.0%.
  • Expenses reached the smallest percentage in history. Due to the Company's commitment to avoid layoffs and permanent store closures during the crisis, the percentage of adjusted operating expenses in relation to net revenue rose from 20.5% in 2Q19 to 23.6% in 2Q20. In order to offset the rise, the Company reduced the salaries of executives and board members, implemented provisional measure 936, which allowed for the suspension of employment contracts and the reduction of working hours and wages, and renegotiated rental and service provision contracts. As a result, in Jun/20, with a large number of stores reopened, the expansion of ship-from-store and the return of Retira Loja, the percentage of expenses in relation to net revenue fell to 20.2%, one of the lowest levels in the Company's history.
  • EBITDA and net profit evolved significantly over the course of the quarter. In 2Q20, the adjusted EBITDA margin fell from 8.8% in 2Q19 to 2.6% in 2Q20. During the same period, the adjusted net result went from a profit of R$85.2 million to a loss of R$62.2 million. However, it is worth tracking the evolution of these results over the course of the quarter. In April, the results were greatly impacted by store closures. In May, with the growth of e-commerceand the gradual reopening of stores, the results were already approaching breakeven, and in June, the trends accelerated and the Company earned a net profit of R$93 million.
  • Highest quarterly cash generation in history. Cash flow from operations, adjusted for receivables, was one of the highlights of the quarter, reaching R$2.2 billion in 2Q20 and R$2.0 billion in the last 12 months. The variation in working capital contributed significantly to this cash generation. With sales growth, inventory turnover also improved during the quarter, reaching less than 60 days in Jun/20, one of the best rates in recent years. At the same time, the Company increased the average purchase period and expanded Magalu Payments, which also contributed to working capital.
  • Net cash position and solid capital structure. In LTM, the Company's adjusted net cash position increased by R$5.0 billion, from R$0.8 billion in Jun/19 to R$5.8 billion in Jun/20. This was driven by cash generated from operations, investments and acquisitions, as well as the Nov/19 follow-on offering. The Company ended 2Q20 with a total cash position of R$7.5 billion, including cash and financial instruments of R$3.0 billion and available credit card receivables of R$4.5 billion.

MGLU3: R$ 81.65 per share

Conference call: Aug 18, 2020 (Tuesday)

Investor Relations: Tel. +55 11 3504-2727

Total Shares: 1,624,731,712

10:00AM in US Time (EST): +1 412 717 9627

www.magazineluiza.com.br/ri

Market Cap: R$ 132.7 billion

11:00AM in Brazil Time: +55 11 3181-8565

ri@magazineluiza.com.br

Magalu

2Q20 Earnings Release

MESSAGE FROM THE EXECUTIVE DIRECTORS

They say that in the world of retail, every day is a struggle for survival. Be that as it may, no period in Magalu's more than 60-year history can be compared to the second quarter of 2020. The crisis brought on by the Covid-19 pandemic was sudden, deep and widespread. A scenario of chaos. It is in the midst of this environment that Magalu made history. Just as the Gulf War was a turning point for CNN, just as the Arab Spring was decisive for Twitter, the pandemic, with all its tragedy, revealed that Magalu was the company best prepared to face the challenging times that followed. We had the model for the moment. And the digital mindset and infrastructure necessary for an almost instant, "V" shaped recovery. In a matter of days, with all of our physical stores closed, Magalu began to sell more than in so-called "normal" quarters. It was epic. And it was the victory of a strong and committed team and a business model that has been honed over the past few years.

We finished the Covid-19 quarter with stronger ties to our customers, investors and society. And we emerged larger, too. To use a soccer metaphor, Magalu won the triple crown.

The first trophy: this quarter, we became the largest retailer in sales in the durable goods sector. Magalu reached R$ 8.6 billion1 in total sales, an increase of 49% compared to the result for the same period in 2019. Even with the burden of having a considerable share of our physical stores closed during the last three months, the company never grew at this speed. And the pace is accelerating as stores reopen, proof that the name of the game is multichannel.

The second trophy: Magalu won first place in formal e-commerce in Brazil. Our e-commerce operation almost tripled in size compared to the same period last year. We achieved this milestone without sacrificing our business ethics, which require us to demand that all marketplace sellers adhere to the legislation and issue sales invoices proving that taxes were paid. Driven in large part by marketplace growth, between April and June of 2020, Magalu's e-commerce operation sold more than the sum of both online and physical stores together in the second quarter of 2019. The growth was 182%, the highest in the Company's history. Our marketplace business, with its 32,000 sellers, advanced an impressive 214%.

Our third trophy: during the quarter, Netshoes became the largest seller of sporting goods in Brazil - even without a physical store operation.

The results of this historic second quarter should not be viewed as a still image, a fixed moment in time, but as a film, an image in motion. April was the month of the initial shock, during which it was necessary to analyze scenarios, adapt routes and take extreme, but necessary, measures, such as the closing of more than 1,100 physical stores. In May, the stores were gradually reopened, bringing monthly results closer to breakeven. In June, with an average of 64% of stores reopened and e-commerce thriving, total sales grew 85%. The e-commerce operation advanced 206% and net income reached R$ 93 million.

1 The value of processed sales in the marketplace (GMV) from April 1 to June 30, 2020 in the amount of R $ 1,831.1 million, which are added up as total total sales in this report, was subject to Independent Limited Assurance by our external auditors and is available on our website. The other components of the quarter's total sales are within the scope of the review of the quarterly information by our independent auditors.

Magalu

2Q20 Earnings Release

Physical store sales growth

E-commerce sales growth

Total sales growth

[% yoy]

[% yoy]

[% yoy]

Gradual reopening of physical stores

Exponential growth of Magalu

Strong acceleration in total sales

after temporary closure

online sales: tripling in May and June

85%

203%

206%

138%

46%

April

May

June

7%

-6%

April

May

June

April

May

June

-53%

-84%

Monthly results - 2nd quarter in R$ million, except %

April

May

June

2Q20

Total Sales

1,883

3,022

3,661

8,567

Growth YoY

7%

46%

85%

49%

Gross Margin

22.9%

24.6%

28.0%

25.8%

EBITDA Margin

-10.0%

3.2%

7.8%

2.6%

Net Income

(148)

(9)

93

(64)

Net Margin

-13.1%

-0.5%

3.7%

-1.2%

It is worth highlighting that the gain in scale and market share--which remains at an accelerated pace--was not achieved by burning cash. Instead, between April and June, the company generated operating cash of R$ 2.2 billion - the highest ever recorded in a quarter. Such cash generation from operations is often indicative of sustainable growth.

Reinforced Pillars

These achievements - celebrated with enthusiasm by our team of more than 35,000 employees - are the result of the strengthening of each of our strategic pillars. Through strict adherence to the strategic pillars, Magalu is gradually becoming the everything store of Brazil. A place - real or virtual - where customers from all over Brazil can buy laundry detergent or the latest smartphone, manage their digital accounts or access information and services via Maga+, our Mobile Virtual Network Operator (MVNO).

Focusing on the strategic pillar of new categories, Magalu placed a special emphasis on groceries, which are essential to the survival of people stuck in isolation. During the second quarter, more than 3 million grocery items were sold. In the year of the #temnomagalu (#TheyHaveItAtMagalu) campaign, grocery became the leading category in the Company's e-commerce operation in terms of the quantity of items sold. Our first-party or 1P operation--items sold from our own inventory--grew and the Company started to buy directly from suppliers such as Unilever, Ambev, Procter & Gamble, Coca-Cola Femsa and Heineken. As a result, the number of available brands has doubled compared to the first three months of this year.

Magalu

2Q20 Earnings Release

Sporting goods and fashion, under the capable leadership of Netshoes, were another highlight. Netshoes became the category leader at a time when the client needed to transfer physical activity from the gym to the home. And it reached the end of the quarter with a net profit for the first time in its history, proving the benefits of Magalu's ecosystem approach. A similar phenomenon occurred within the category of beauty and personal care. Between April and June, Época Cosméticos grew 167%, made a profit and surpassed the 1 million active customer mark.

The performance of Magalu's marketplace was another highlight of the quarter. The marketplace experienced unprecedented growth--above any other in the market-and added more than 6,000 new sellers who gained access to more than 27 million active customers through our digital channels. Among the new sellers joining our platform are the Magalu Partners, small, analog retailers with annual sales of up to R$ 81,000, which make up the vast majority of companies in Brazil. These small retailers, heretofore 100% analog and, therefore, limited by physical and temporal boundaries are now online and "open" seven days a week, 24 hours a day, to consumers across Brazil.

The expansion of our product offerings and changes in consumption habits catalyzed logistics improvements needed to guarantee the fastest delivery speeds at the lowest costs. With stores partially closed, Magalu accelerated its ship-from-store strategy. Thanks to the contribution of this new modality, approximately 35% of total deliveries are now delivered within 24 hours - an especially important convenience during the pandemic. Delivery speeds should improve further with the return of in-storepick-up in the third quarter. To accelerate deliveries, especially for grocery items, 700 of our more than 1,100 physical stores were converted into dark stores for this category. We also began stocking e-commerce bestsellers in our physical stores so that they could be quickly collected by Logbee and transported for last-mile delivery. Malha Luiza also grew and now includes over 4,000 micro-transport delivery companies and Logbee drivers.

As of April, physical stores began to reopen. During the second quarter, an average of only 36% of our stores were operational. These stores showed a surprising 25% sales growth, when considering the criteria of same store sales and same day sales. The Mobile Remote Sales app, a remote version of the application normally used by salespeople in-store, was adapted to enable salespeople to serve customers through social networks, boosting physical store sales. The reopening of physical stores did not cannibalize e-commerce sales and physical stores continue to be extremely important for the company's profitability.

The sophistication of our Superapp continues to grow as new features are added and integrated. At the beginning of the year, MagaluPay - the company's digital account - became available. In July, an aggressive, but value-accretive, cashback campaign was launched, in which customers can receive cash back by purchasing at Magalu and activating their digital accounts. Unlike some companies, our digital account is fully integrated into our Superapp. Account activations are made quickly, simply and intuitively all within the same app. Since the launch of cashback, thousands of customers have received cash back on their purchases, helping MagaluPay reach the important milestone of 1 million account activations within a few weeks.

The pandemic also helped accelerate the roll-out of the Magalu-as-a-Service (MaaS) pillar. It was through MaaS initiative Partner Magalu that thousands of sellers and small entrepreneurs were able to start the process of digitalization. For many, MaaS provided a critical life line at a time when operating analogically, via physical stores, was impossible. Through another initiative, Magalu Payments, marketplace sellers were able to seamlessly factor their receivables. Since its launch, the service has processed over R$ 3 billion in financial transactions (TPV). And 85% of marketplace sellers currently participate in Magalu's umbrella contract with Correios, Magalu Entregas. The number of marketplace sellers using Magalu's logistic services has also grown and currently approximately 800 marketplace sellers are cross docking via Magalu.

The MaaS pillar has also been strengthened by several recent acquisitions. At the end of July, Magalu announced its entry into the Factory to Consumer (F2C) segment with the purchase of Hubsales. Thus, in addition to digitizing retail, Magalu will also help digitalize the Brazilian manufacturing sector. Days later, Magalu announced the acquisition of Canaltech and the Inloco Media platform. The operations mark the company's entry into the online advertising segment, combining content generation and audience (Canaltech) with the platform for selling digital media (InLoco). Through our new initiative, MagaluAds, thousands of Magalu partners - marketplace sellers and suppliers - will be able to promote their brands and products reaching consumers the moment that purchase decisions are being made. It will soon be possible to promote the millions of products available on the Magalu platform and accelerate the monetization of the Company's digital audience of approximately 80 million unique visitors

Magalu

2Q20 Earnings Release

per month (number under overlap analysis). With the continued expansion of MaaS, Magalu moves closer to realizing its objective of becoming the operating system for retail in Brazil.

Optimism and renewed commitment

The third quarter began with a spectacular July. Total sales grew 82%. E-commerce, even considering netshoes as part of comparison base, increased 162%. And Magalu returned - albeit partially - to the multichannel configuration that led it to market leadership: a virtuous symbiosis of online and offline. Even with an average of only 73% of stores open, physical store sales grew 10% during the month when compared to Jul/19. The evolution of results, month after month, leaves us optimistic for what lies ahead. We believe that 2020 will be, in all senses, an exceptional year for the company. Following the same trend as in recent years, we will reinvest part of the gains obtained with the new level of sales in initiatives to generate more value for our customers. We plan to hire more than two thousand new employees to reinforce our customer service and logistics teams. In addition, we will continue to invest in the expansion of new categories, the growth of the SuperApp and the roll-out of Magalu Pay.

July Sales Growth [% yoy]

+10%

+162%

+82%

Physical Stores

E-commerce

Total Sales

In a period plagued by so many uncertainties, difficulties and fears, we are extremely proud of what we have been able to accomplish. In this era of ESG, perhaps no growth indicator or statistic moves us as much as the fact that Magalu, despite the crisis and because of the crisis, was able to rise to the occasion and truly fulfill its role as a corporate citizen during these extraordinary times.

For the last three months, as so many businesses closed their doors, Magalu helped keep families afloat by creating an initiative which enabled individuals to earn income from the digital sale of items from Magalu's and marketplace sellers' inventories. Approximately 350,000 individuals availed themselves of the opportunity and registered on the company's platform.

Like our business model, our social commitment is also multichannel. In the midst of the panic at the start of the crisis, we made a vocal public commitment not to fire any of our employees. At the same time, we supported our small suppliers, paying them on time and in full. Combating domestic violence has historically been one of our priorities. In view of the evidence of increased aggression during the quarantine, we relaunched the report button installed in our superapp - a shortcut for victims of domestic violence to quickly inform the authorities.

Since April, the controlling families and Magalu have also announced the donation of R$ 50 million to help victims of the pandemic. These funds are being invested in the purchase of equipment for hospitals, in the financing of NGOs and in the purchase of basic food supplies.

On the environmental front, Magalu signed an agreement so that, as of the end of this year, 214 of our physical stores will begin operating exclusively with solar energy. By the beginning of 2021, another 300 stores, located in more than 10 Brazilian states, will also participate.

The trauma of the pandemic has only reinforced our conviction that the only way forward is the digitalization of Brazil. The future came faster and more painfully than we imagined. But it is here and we need to embrace it. Magalu is a company that has been trusted by Brazilians for 63 years. Over the course of the Covid-19 pandemic, we became one of the most admired brands in the country. This is the human warmth for which Brazilians are famous. Human warmth is an essential part of Magalu's culture and it is what makes us reciprocate everything that we receive.

Once again, we thank our customers, employees, sellers, partners and suppliers for their continued trust and support.

EXECUTIVE MANAGEMENT TEAM

Magalu

2Q20 Earnings Release

R$ million (except when otherwise indicated)

2Q20

2Q19

% Chg

1H20

1H19

% Chg

Total Sales¹ (including marketplace)

8,566.5

5,747.0

49.1%

16,229.0

11,465.0

41.6%

-

-

Gross Revenue

6,816.6

5,196.2

31.2%

13,302.8

10,509.4

26.6%

Net Revenue

5,568.2

4,308.1

29.3%

10,803.0

8,637.1

25.1%

Gross Income

1,435.2

1,092.2

31.4%

2,855.7

2,303.7

24.0%

Gross Margin

0.3

25.4%

40 bps

0.3

26.7%

-30 bps

EBITDA

143.7

379.9

-62.2%

476.4

775.3

-38.6%

EBITDA Margin

2.6%

8.8%

-620 bps

4.4%

9.0%

-460 bps

Net Income

(64.5)

386.6

-116.7%

(33.7)

518.7

-106.5%

Net Margin

-1.2%

9.0%

-1020 bps

-0.3%

6.0%

-630 bps

Adjusted - Gross Income

1,435.2

1,264.2

13.5%

2,855.7

2,475.7

15.4%

Adjusted - Gross Margin

25.8%

29.3%

-350 bps

26.4%

28.7%

-230 bps

Adjusted - EBITDA

147.2

380.5

-61.3%

421.1

766.1

-45.0%

Adjusted - EBITDA Margin

2.6%

8.8%

-620 bps

3.9%

8.9%

-500 bps

-

-

-

-

Adjusted - Net Income

(62.2)

85.2

-173.1%

(70.2)

210.8

-133.3%

Adjusted - Net Margin

-1.1%

2.0%

-310 bps

-0.7%

2.4%

-310 bps

Same Physical Store Sales Growth

-50.9%

0.3%

-

-27.7%

4.1%

-

Total Physical Store Sales Growth

-45.1%

8.8%

-

-19.3%

12.2%

-

Internet Sales Growth (1P)

171.5%

30.9%

-

107.3%

32.1%

-

Total E-commerce Sales Growth

181.9%

56.2%

-

127.5%

53.1%

-

E-commerce Share in Total Sale

78.5%

41.5%

37.0 pp

66.6%

41.4%

25.2 pp

Number of Stores - End of Period

1,157

987

170 stores

1,157

987

170 stores

Sales Area - End of Period (M2)

647,171

585,341

10.6%

647,171

585,341

10.6%

  1. Total Sales includes sales from physical stores, traditional e-commerce (1P) and marketplace (3P).
  2. E-commerceSales include Netshoes sales.

Magalu

2Q20 Earnings Release

NON-RECURRING EVENTS

For ease of comparison with 2Q19, 2Q20 results are also being presented in an adjusted view, without the effects of non- recurring provisions and expenses.

CONCILIATION ADJUSTED INCOME

2Q20

V.A.

Non-recurring

2Q20

V.A.

STATEMENT (R$ million)

Adjusted

Gross Revenue

6,816.6

122.4%

-

6,816.6

122.4%

Taxes and Deductions

(1,248.3)

-22.4%

-

(1,248.3)

-22.4%

Net Revenue

5,568.2

100.0%

-

5,568.2

100.0%

Total Costs

(4,133.0)

-74.2%

-

(4,133.0)

-74.2%

Gross Income

1,435.2

25.8%

-

1,435.2

25.8%

Selling Expenses

(1,116.3)

-20.0%

-

(1,116.3)

-20.0%

General and Administrative Expenses

(182.0)

-3.3%

-

(182.0)

-3.3%

Provisions for Loan Losses

(29.1)

-0.5%

-

(29.1)

-0.5%

Other Operating Revenues, Net

12.0

0.2%

(3.5)

8.5

0.2%

Equity in Subsidiaries

27.5

0.5%

-

27.5

0.5%

Total Operating Expenses

(1,288.0)

-23.1%

(3.5)

(1,291.5)

-23.2%

EBITDA

147.2

2.6%

(3.5)

143.7

2.6%

Depreciation and Amortization

(172.3)

-3.1%

-

(172.3)

-3.1%

EBIT

(25.0)

-0.4%

(3.5)

(28.5)

-0.5%

Financial Results

(94.6)

-1.7%

-

(94.6)

-1.7%

Operating Income

(119.6)

-2.1%

(3.5)

(123.1)

-2.2%

Income Tax and Social Contribution

57.3

1.0%

1.2

58.5

1.1%

Net Income

(62.2)

-1.1%

(2.3)

(64.5)

-1.2%

Magalu

2Q20 Earnings Release

Adjustments - Non - Recurring Events

Adjustments

2Q20

1H20

Tax Credits

12.0

56.3

Tax Provisions

3.0

33.8

Expert Fees

(7.7)

(15.5)

Pre-operating Store Expenses

(2.0)

(3.9)

Other Non-recurring Expenses

(8.7)

(15.4)

EBITDA Adjustments

(3.5)

55.3

Income Tax and Social Contribution

1.2

(18.8)

Net Income Adjustments

(2.3)

36.5

Magalu

2Q20 Earnings Release

OPERATING AND FINANCIAL PERFORMANCE

Magalu ended 2Q20 with 1.157 stores (910 conventional and 195 virtual), 51 kiosks (Lojas Marisa partnership) and an e-commerce operation). In the last 12 months, the Company opened 172 new stores (19 in the South, 64 in the Southeast, 26 in the Midwest, 14 in the Northeast and 49 in the North). Thirty-five percent of our total number of stores are not yet mature.

Number of Stores

Average Age of Stores (number of stores)

1,113

1,157

1,157

912

791

795

855

987

1039

810

195

195

195

183

51

176

5

51

1

1

1

1

1

810

855

912

910

910

4Q18

2Q19

1Q19

3Q19

2Q19

3Q19

2Q20

4Q19

4Q19

1Q20

Conventional Stores

Website

Kiosk

Virtual Stores

Total

Up to 1 year

Up to 2 years

Up to 3 years

Up to 4 years

Up to 5 years

More than 5 years

Up to 4 years

Up to 5 years

More than 5 years

Total Retail sales were up 49.1% in 2Q20 as a result of a 181.9% increase in e-commerce sales and a 45.1% decrease in brick-and- mortar store sales. Stores were temporarily closed due to the new Coronavirus pandemic and were gradually reopened during the quarter. In 1H20, total sales grew 41.6%.

Total Sales Growth (%)

Same Physical Store Sales Growth

Physical Store Total Sales Growth

Tradicional Ecommerce Growth (1P)

Total E-commerce Growth (1P+3P)

181.9%

Total Retail Sales Growth

171.5%

127.5%

107.3%

56.2%

49.1%

53.1%

41.6%

30.9%

32.1%

24.4%

0.3% 8.8%

26.2%

4.1% 12.2%

-19.3%

-45.1%

-27.7%

-50.9%

2Q19

2Q20

1H19

1H20

Luiza Card's share of sales decreased from 29% to 12% in 2Q20, due to the temporary closure of stores and an increase in the share of e-commerce in total sales.

Financed Sales Mix (% of total sales)

20%

23%

21%

23%

46%

47%

62%

57%

5%

5%

29%

3%

27%

4%

16%

12%

2Q19

2Q20

1H19

1H20

Luizacard

DCC

Third Party Cards

Cash Sales/Down Payment

Luizacard

DCC

Third Party Cards

Cash Sales/Down Payment

Magalu

2Q20 Earnings Release

Gross Revenues

(in R$ million)

2Q20

2Q19

% Chg

1H20

1H19

% Chg

Gross Revenue - Retail - Merchandise Sales

6,428.9

4,906.9

31.0%

12,562.8

9,966.9

26.0%

Gross Revenue - Retail - Services

324.6

259.9

24.9%

639.9

488.8

30.9%

Gross Revenue - Retail

6,753.5

5,166.8

30.7%

13,202.8

10,455.7

26.3%

Gross Revenue - Other Services

80.6

34.6

132.7%

146.3

64.6

126.3%

Inter-Company Eliminations

(17.5)

(5.3)

231.4%

(46.2)

(10.9)

323.3%

Gross Revenue - Total

6,816.6

5,196.2

31.2%

13,302.8

10,509.4

26.6%

In 2Q20, total gross revenue grew 31.2% to R$6.8 billion. The accelerated growth of e-commerce, including Netshoes, and the gradual reopening of physical stores during the quarter contributed to the evolution of gross revenue. The strong growth was achieved despite the fact that, on average, only 36% of stores were open during the period. Despite the temporary closure of physical stores, service revenue increased 24.9% in 2Q20, driven primarily by the growth of the Marketplace and Magalu Payments. In 1H20, gross revenue grew 26.6% to R$13.3 billion.

Net Revenues

(in R$ million)

2Q20

2Q19

% Chg

1H20

1H19

% Chg

Net Revenue - Retail - Merchandise Sales

5,222.8

4,049.9

29.0%

10,139.7

8,152.9

24.4%

Net Revenue - Retail - Services

294.2

232.1

26.7%

582.2

436.3

33.5%

Net Revenue - Retail

5,516.9

4,281.9

28.8%

10,721.9

8,589.1

24.8%

Net Revenue - Other Services

68.8

31.4

118.9%

127.3

58.9

116.3%

Inter-Company Eliminations

(17.5)

(5.3)

231.4%

(46.2)

(10.9)

323.3%

Net Revenue - Total

5,568.2

4,308.1

29.3%

10,803.0

8,637.1

25.1%

In 2Q20, total net revenue rose 29.3% to R$5.6 billion in line with total gross revenue. In 1H20, net revenues rose 25.1% to R$10.8 billion.

Gross Profit

(in R$ million)

Adjusted

Adjusted

2Q20

2Q19

% Chg

1H20

1H19

% Chg

Gross Profit - Retail - Merchandise Sales

1,148.2

1,020.5

12.5%

2,291.8

2,019.5

13.5%

Gross Profit - Retail - Services

294.2

232.1

26.7%

582.2

436.3

33.5%

Gross Profit - Retail

1,442.4

1,252.6

15.2%

2,874.0

2,455.8

17.0%

Gross Profit - Other Services

9.0

13.4

-33.0%

23.4

23.6

-0.7%

Inter-Company Eliminations

(16.1)

(1.7)

831.6%

(41.7)

(3.7)

1018.2%

Gross Profit - Total

1,435.2

1,264.2

13.5%

2,855.7

2,475.7

15.4%

Gross Margin - Total

25.8%

29.3%

-350 bps

26.4%

28.7%

-230 bps

In 2Q20, adjusted gross profit increased by 13.5% to R$1.4 billion, equivalent to a gross margin of 25.8%. This was due to the growth of traditional, 1P e-commerce as a percentage of total sales. In 1H20, gross profit rose 15.4% to R$2.9 billion, equivalent to a gross margin of 26.4%.

Magalu

2Q20 Earnings Release

Operating Expenses

(in R$ million)

Adjusted

Adjusted

Adjusted

Adjusted

2Q20

% NR

2Q19

% NR

% Chg

1H20

% NR

1H19

% NR

% Chg

Selling Expenses

(1,116.3)

-20.0%

(726.2)

-16.9%

53.7%

(2,054.6)

-19.0%

(1,419.2)

-16.4%

44.8%

General and Administrative Expenses

(182.0)

-3.3%

(154.8)

-3.6%

17.5%

(376.6)

-3.5%

(291.1)

-3.4%

29.4%

General and Administrative Expenses

(1,298.3)

-23.3%

(881.0)

-20.5%

47.4%

(2,431.2)

-22.5%

(1,710.3)

-19.8%

42.2%

Provisions for Loan Losses

(29.1)

-0.5%

(13.2)

-0.3%

120.6%

(59.1)

-0.5%

(25.6)

-0.3%

130.8%

Other Operating Revenues, Net

12.0

0.2%

13.0

0.3%

-7.7%

25.8

0.2%

28.7

0.3%

-10.1%

Total Operating Expenses

(1,315.4)

-23.6%

(881.2)

-20.5%

49.3%

(2,464.5)

-22.8%

(1,707.2)

-19.8%

44.4%

Selling Expenses

In 2Q20, selling expenses totaled R$1.1 billion, equivalent to 20.0% of net revenue, 3.1 p.p. higher than in 2Q19. This increase reflects the Company's commitment to avoid layoffs and permanent store closures during the crisis. To mitigate this effect, the Company reduced the salaries of executives and board members, implemented provisional measure 936, which allowed the suspension of employment contracts and the reduction of working hours and wages, and renegotiated rental and service provision contracts. In 1H20, selling expenses totaled R$ 2.1 billion, equivalent to 19.0% of net revenue (+2.6 p.p. versus 1H19).

General and Administrative Expenses

General and administrative expenses totaled R$182.0 million or 3.3% of net revenues, a reduction of 30 bps in relation to 2Q19. This was driven in large part by the strong sales growth and various cost containment strategies implemented by the Company. In 1H20, general and administrative expenses totaled R$376.6 million or 3.5% of net revenues.

Provisions for Loan Losses

Provisions for loan losses reached R$29.1 million in 2Q20 and R$59.1 in 1H20.

Other Operating Revenues and Expenses, Net

(in R$ million)

Adjusted

Adjusted

Adjusted

Adjusted

2Q20

% NR

2Q19

% NR

% Chg

1H20

% NR

1H19

% NR

% Chg

Gain on Sale of Assets

(1.8)

0.0%

0.1

0.0%

-

(1.9)

0.0%

3.0

0.0%

-

Deferred Revenue Recorded

13.8

0.2%

12.9

0.3%

7.3%

27.7

0.3%

25.7

0.3%

7.6%

Subtotal - Adjusted

12.0

0.2%

13.0

0.3%

-7.7%

25.8

0.2%

28.7

0.3%

-10.1%

Tax Credits

12.0

0.2%

571.1

13.3%

-97.9%

56.3

0.5%

571.1

6.6%

-90.1%

Tax Provisions

3.0

0.1%

(246.0)

-5.7%

-

33.8

0.3%

(230.0)

-2.7%

-

Expert Fees

(7.7)

-0.1%

(115.2)

-2.7%

-93.3%

(15.5)

-0.1%

(115.2)

-1.3%

-86.6%

Pre-operating Store Expenses

(2.0)

0.0%

(1.7)

0.0%

18.0%

(3.9)

0.0%

(7.9)

-0.1%

-50.4%

Retention Contracts and Others

(8.7)

-0.2%

(36.7)

-0.9%

-76.3%

(15.4)

-0.1%

(36.7)

-0.4%

-57.9%

Subtotal - Non Recurring

(3.5)

-0.1%

171.4

4.0%

-102.0%

55.3

0.5%

181.2

2.1%

-69%

Total

8.5

0.2%

184.4

4.3%

-95.4%

81.1

0.8%

209.9

2.4%

-61.4%

Other adjusted net operating revenues and expenses came to R$12.0 million in 2Q20. This was largely due to an allocation of R$13.8 million in deferred revenues. In 1H20 adjusted net operating revenues and expenses came to R$25.8 million.

Equity Income

2Q20 equity income was R$27.5 million. This was composed of: (i) R$ 12.5 million generated by the performance of Luizacred, and (ii) R$15.0 million generated by Luizaseg. In 1H20, equity income was R$29.9 million.

Magalu

2Q20 Earnings Release

EBITDA

In 2Q20, adjusted EBITDA reached R$147.2 million. High e-commerce sales growth, including the marketplace, contributed to the EBITDA growth. However, the lost sales due to the temporary closure of stores influenced the adjusted EBITDA margin, which went from 8.8% in 2Q19 to 2.6% in 2Q20. In 1H20, adjusted EBITDA reached R$421.1 million, a margin of 3.9%.

EBITDA performance (% of net revenue)

8.8%

4.9%

0.6%

1.9%

0.3%

0.2%

0.1%

2.6%

0.0%

2.6%

2Q19

Gross

Selling Exp.

G&A Exp.

Equity

Loan Loss

Other

2Q20

Non-

2Q20

Adjusted

Margin

Income

Provision

Adjusted

recurring

Financial Results

R$ million

2Q20

% NR

2Q19

% NR

% Chg

1H20

% NR

1H19

% NR

% Chg

Financial Expenses

(96.8)

-1.7%

(177.3)

-4.1%

-45.4%

(190.9)

-1.8%

(293.0)

-3.4%

-34.8%

Interest on loans and financing

(14.8)

-0.3%

(14.7)

-0.3%

0.3%

(25.5)

-0.2%

(21.7)

-0.3%

17.7%

Interest on prepayment of receivables - third party

card

(23.8)

-0.4%

(46.6)

-1.1%

-48.9%

(46.2)

-0.4%

(83.8)

-1.0%

-44.9%

Interest on prepayment of receivables - Luiza Card

(30.1)

-0.5%

(75.5)

-1.8%

-60.1%

(68.1)

-0.6%

(131.9)

-1.5%

-48.4%

Other expenses

(28.1)

-0.5%

(40.4)

-0.9%

-30.5%

(51.1)

-0.5%

(55.5)

-0.6%

-8.0%

Financial Revenues

45.6

0.8%

479.7

11.1%

-90.5%

88.5

0.8%

517.7

6.0%

-82.9%

Gains on marketable securities

6.4

0.1%

2.3

0.1%

176.1%

8.2

0.1%

3.7

0.0%

120.0%

Other financial revenues

39.2

0.7%

477.4

11.1%

-91.8%

80.3

0.7%

513.9

6.0%

-84.4%

Subtotal: Net Financial Results

(51.2)

-0.9%

302.4

7.0%

-116.9%

(102.4)

-0.9%

224.7

2.6%

-145.6%

Interest on lease

(43.3)

-0.8%

(46.4)

-1.1%

-6.7%

(86.5)

-0.8%

(67.7)

-

-

Total Net Financial Results

(94.6)

-1.7%

256.0

5.9%

-136.9%

(189.0)

-1.7%

157.1

1.8%

-220.3%

(-) Update - Tax Credits

-

-

459.9

10.7%

0.0%

-

-

459.9

5.3%

0.0%

(-) Taxes and Expenses / Non recurring

-

-

(58.9)

-1.4%

0.0%

-

-

(58.9)

-0.7%

0.0%

Total Financial Results - Adjusted

(94.6)

-1.7%

(144.9)

-3.4%

-34.8%

(189.0)

-1.7%

(243.9)

-2.8%

-22.5%

In 2Q20, net financial results came to R$94.6 million or 1.7% of net revenue. In relation to net revenue, net financial expenses improved by 170 bps compared to adjusted 2Q19 due to lower interest rates and a better capital structure. Setting aside the interest on lease effects, the adjusted net financial result was R$51.2 million, or 0.9% of net revenue. In 1H20, net financial results came to R$189.0 million or 1.7% of net revenue (-1.1 p.p. YoY versus 1H19 ajusted).

Magalu

2Q20 Earnings Release

Net Income

2Q20 adjusted net income was a loss of R$62.2 million, due primarily to the temporary closure of physical stores during the quarter. It is worth examining the evolution of this result over the course of the quarter. In April, the number was greatly impacted by store closures. In May, with the increase in e-commerce and the gradual reopening of physical stores, the result was already close to breakeven. In June, these trends accelerated and the Company earned a net profit of R$93 million.

Working Capital - Adjusted

CONSOLIDATED (R$ million)

LTM

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

(+) Accounts Receivables

37.2

680.8

781.3

794.0

733.0

643.6

(+) Inventories

1,641.8

4,198.2

4,075.5

3,801.8

2,885.7

2,556.3

(+) Related Parties

22.4

80.4

77.1

100.6

81.8

58.1

(+) Recoverable Taxes

36.2

748.9

877.4

864.1

745.7

712.7

(+) Other Assets

(12.5)

100.2

143.5

136.3

145.1

112.7

(+) Current Operating Assets

1,725.2

5,808.6

5,954.8

5,696.8

4,591.3

4,083.4

-

(-) Suppliers

1,938.1

5,334.0

4,132.7

5,934.9

3,802.8

3,395.9

(-) Onlendings and other deposits

639.3

639.3

235.9

-

-

-

(-) Payroll, Vacation and Related Charges

26.7

329.0

263.3

354.7

349.8

302.3

(-) Taxes Payable

32.2

206.4

176.9

352.0

208.8

174.2

(-) Related Parties

(9.6)

103.4

52.8

152.1

125.6

113.1

(-) Taxes in Installments

-

-

-

-

-

-

(-) Deferred Revenue

0.0

43.1

43.0

43.0

43.0

43.0

(-) Other Accounts Payable

117.8

806.2

547.0

701.7

688.2

688.4

(-) Current Operating Liabilities

2,744.5

7,461.3

5,451.6

7,538.5

5,218.3

4,716.7

-

(=) Working Capital Adjusted

(1,019.4)

(1,652.7)

503.2

(1,841.7)

(627.0)

(633.3)

% of Gross Revenue (LTM)

-3.0%

-6.1%

2.0%

-7.6%

-2.8%

-3.1%

In Jun 20, the adjusted working capital need was negative by R$1,652.7 million, contributing significantly to the strong cash generation during the quarter. Average inventory turnover increased from 72 days in 2Q19 to 91 days in 2Q20, influenced by the temporary closure of physical stores. During the same period, the average payment term increased from 93 days to 113 days.

It is worth noting that, with increased sales growth, inventory turnover improved substantially during the quarter, reaching less than 60 days in Jun/20 - the lowest level in recent years. In addition, the growth of the marketplace and Magalu Payments contributed to cash generation. In the last 12 months, the variation in adjusted working capital contributed R $ 1.0 billion to the generation of operating cash.

Capex

CAPEX (in R$ million)

2Q20

%

2Q19

%

%Chg

1H20

%

1H19

%

%Chg

New Stores

11.9

17%

18.2

15%

-35%

47.8

27%

27.3

13%

75%

Remodeling

3.2

5%

21.7

17%

-85%

8.6

5%

29.9

15%

-71%

Technology

42.7

61%

30.8

25%

39%

78.5

45%

51.8

25%

52%

Logistics

9.7

14%

39.2

31%

-75%

25.7

15%

74.6

36%

-66%

Other

2.0

3%

14.6

12%

-86%

14.2

8%

21.2

10%

-33%

Total

69.5

100%

124.4

100%

-44%

174.9

100%

204.8

100%

-15%

2Q20 investments totaled R$69.5 million. Investments included the opening of new stores, investments in technology and logistics. Due to the Covid-19 pandemic, the new stores scheduled for 2Q20, such as those to be opened in Brasília and some of the kiosks in partnership with Lojas Marisa, were postponed until 3Q20.

Magalu

2Q20 Earnings Release

Capital Structure

CONSOLIDATED (R$ million)

LTM

jun-20

mar-20

dez-19

set-19

jun-19

(-) Current Loans and Financing

(1,607.5)

(1,650.8)

(6.5)

(10.0)

(313.4)

(43.3)

(-)Non-current Loans and Financing

1,106.4

(14.0)

(847.4)

(838.9)

(832.7)

(1,120.4)

(=) Gross Debt

(501.1)

(1,664.8)

(853.8)

(848.8)

(1,146.1)

(1,163.7)

(+) Cash and Cash Equivalents

477.8

1,103.5

388.9

305.7

221.8

625.7

(+) Current Securities

1,437.7

1,878.8

2,231.3

4,448.2

238.7

441.1

(+) Non-current Securities

(0.3)

-

-

0.2

0.3

0.3

(+) Total Cash

1,915.3

2,982.3

2,620.2

4,754.1

460.8

1,067.1

(=) Net Cash

1,414.1

1,317.5

1,766.3

3,905.3

(685.3)

(96.6)

(+) Credit Card - Third Party Card

2,888.1

3,705.3

1,365.7

2,121.0

1,142.0

817.2

(+) Credit Card - Luiza Card

714.4

782.6

649.2

269.5

157.4

68.2

(+) Total Credit Card

3,602.5

4,487.9

2,014.9

2,390.5

1,299.4

885.4

(=) Adjusted Net Cash

5,016.6

5,805.4

3,781.2

6,295.8

614.1

788.8

Short Term Debt / Total

95%

99%

1%

1%

27%

4%

Long Term Debt / Total

-95%

1%

99%

99%

73%

96%

Adjusted EBITDA (LTM)

(80.5)

1,314.7

1,548.0

1,659.7

1,511.8

1,395.2

Adjusted Net Cash / Adjusted EBITDA

3.9 x

4.4 x

2.4 x

3.8 x

0.4 x

0.6 x

Cash, Securities and Credit Cards

5,517.7

7,470.2

4,635.1

7,144.6

1,760.2

1,952.5

(=) Net Debt

565.3

1,317.5

1,766.3

3,905.3

(685.3)

(96.6)

Net Debt/ EBITDA

1.1 x

1.0 x

1.1 x

2.4 x

-0.5 x

-0.1 x

During the last 12 months, the Company improved its adjusted net cash position by R$5.0 billion, from an adjusted net cash position of R$0.8 billion in Jun/19 to R$5.8 billion in Jun/20. This improvement was due to cash generation from operations, investments and acquisitions, and the proceeds of the Nov/19 follow-on offering.

The Company ended 2Q20 with a total cash position of R$7.5 billion, with cash and securities worth R$3.0 billion and R$5.4 billion worth of credit card receivables.

Magalu

2Q20 Earnings Release

ANNEX I

FINANCIAL STATEMENTS - CONSOLIDATED INCOME STATEMENT

CONSOLIDATED INCOME

2Q20

V.A.

2Q20

V.A.

% Chg

1H20

V.A.

1H19

V.A.

% Chg

STATEMENT (R$ million)

Gross Revenue

6,816.6

122.4%

5,196.2

120.6%

31.2%

13,302.8

123.1%

10,509.4

121.7%

26.6%

Taxes and Deductions

(1,248.3)

-22.4%

(888.1)

-20.6%

40.6%

(2,499.9)

-23.1%

(1,872.3)

-21.7%

33.5%

Net Revenue

5,568.2

100.0%

4,308.1

100.0%

29.3%

10,803.0

100.0%

8,637.1

100.0%

25.1%

Total Costs

(4,133.0)

-74.2%

(3,215.9)

-74.6%

28.5%

(7,947.3)

-73.6%

(6,333.4)

-73.3%

25.5%

Gross Income

1,435.2

25.8%

1,092.2

25.4%

31.4%

2,855.7

26.4%

2,303.7

26.7%

24.0%

Selling Expenses

(1,116.3)

-20.0%

(726.2)

-16.9%

53.7%

(2,054.6)

-19.0%

(1,419.2)

-16.4%

44.8%

General and Administrative Expenses

(182.0)

-3.3%

(154.8)

-3.6%

17.5%

(376.6)

-3.5%

(291.1)

-3.4%

29.4%

Provisions for Loan Losses

(29.1)

-0.5%

(13.2)

-0.3%

120.6%

(59.1)

-0.5%

(25.6)

-0.3%

130.8%

Other Operating Revenues, Net

8.5

0.2%

184.4

4.3%

-95.4%

81.1

0.8%

209.9

2.4%

-61.4%

Equity in Subsidiaries

27.5

0.5%

(2.5)

-0.1%

-

29.9

0.3%

(2.4)

0.0%

-

Total Operating Expenses

(1,291.5)

-23.2%

(712.3)

-16.5%

81.3%

(2,379.3)

-22.0%

(1,528.4)

-17.7%

55.7%

EBITDA

143.7

2.6%

379.9

8.8%

-62.2%

476.4

4.4%

775.3

9.0%

-38.6%

Depreciation and Amortization

(172.3)

-3.1%

(96.8)

-2.2%

77.9%

(347.1)

-3.2%

(200.8)

-2.3%

72.9%

EBIT

(28.5)

-0.5%

283.1

6.6%

-110.1%

129.3

1.2%

574.5

6.7%

-77.5%

Financial Results

(94.6)

-1.7%

256.0

5.9%

-136.9%

(189.0)

-1.7%

157.1

1.8%

-220.3%

Operating Income

(123.1)

-2.2%

539.1

12.5%

-122.8%

(59.7)

-0.6%

731.6

8.5%

-108.2%

Income Tax and Social Contribution

58.5

1.1%

(152.4)

-3.5%

-138.4%

26.0

0.2%

(212.8)

-2.5%

-112.2%

Net Income

(64.5)

-1.2%

386.6

9.0%

-116.7%

(33.7)

-0.3%

518.7

6.0%

-106.5%

Calculation of EBITDA

Net Income

(64.5)

-1.2%

386.6

9.0%

-116.7%

(33.7)

-0.3%

518.7

6.0%

-106.5%

(+/-) Income Tax and Social Contribution

(58.5)

-1.1%

152.4

3.5%

-138.4%

(26.0)

-0.2%

212.8

2.5%

-112.2%

(+/-) Financial Results

94.6

1.7%

(256.0)

-5.9%

-136.9%

189.0

1.7%

(157.1)

-1.8%

-220.3%

(+) Depreciation and Amortization

172.3

3.1%

96.8

2.2%

77.9%

347.1

3.2%

200.8

2.3%

72.9%

EBITDA

143.7

2.6%

379.9

8.8%

-62.2%

476.4

4.4%

775.3

9.0%

-38.6%

Reconciliation of EBITDA for non-recurring expenses

EBITDA

143.7

2.6%

379.9

8.8%

-62.2%

476.4

4.4%

775.3

9.0%

-38.6%

Non-recurring Result

3.5

0.1%

0.6

0.0%

496.2%

(55.3)

-0.5%

(9.2)

-0.1%

498.2%

Adjusted EBITDA

147.2

2.6%

380.5

8.8%

-61.3%

421.1

3.9%

766.1

8.9%

-45.0%

Net Income

(64.5)

-1.2%

386.6

9.0%

-116.7%

(33.7)

-0.3%

518.7

6.0%

-106.5%

Non-recurring Result

2.3

0.0%

(301.5)

-7.0%

-100.8%

(36.5)

-0.3%

(307.9)

-3.6%

-88.2%

Adjusted Net Income

(62.2)

-1.1%

85.2

2.0%

-173.1%

(70.2)

-0.7%

210.8

2.4%

-133.3%

  • EBITDA (EBITDA - Earnings before Interest, Income Taxes including Social Contribution on Net Income, Depreciation and Amortization) is a non-GAAP measurement prepared by the Company, in accordance with CVM Instruction No. 527 of April 04 October 2012. EBITDA consists of the Company's net income, plus net financial income, income tax and social contribution, and depreciation and amortization costs and expenses.
    Adjusted EBITDA consists of adjusted EBITDA for extraordinary expenses and IFRS 16 effects. In the case of the adjustment identified above, this result refers to tax credits, the Netshoes acquisition and other provisions and non-recurring expenses. The Company understands that the disclosure of Adjusted EBITDA is necessary to understand the actual impact on cash generation, excluding extraordinary events. Adjusted EBITDA is not a performance metric adopted by IFRS. The Company's adjusted EBITDA definition may not be comparable to similar measures provided by other companies.

Magalu

2Q20 Earnings Release

ANNEX II - ADJUSTED

FINANCIAL STATEMENTS - CONSOLIDATED INCOME STATEMENT

CONSOLIDATED INCOME

2Q20

STATEMENT (R$ million)

Adjusted

V.A.

2Q19

Adjusted

V.A.

% Chg

1H20

Adjusted

V.A.

1H19

V.A.

% Chg

Adjusted

Gross Revenue

6,816.6

122.4%

5,196.2

120.6%

31.2%

13,302.8

123.1%

10,509.4

121.7%

26.6%

Taxes and Deductions

(1,248.3)

-22.4%

(888.1)

-20.6%

40.6%

(2,499.9)

-23.1%

(1,872.3)

-21.7%

33.5%

Net Revenue

5,568.2

100.0%

4,308.1

100.0%

29.3%

10,803.0

100.0%

8,637.1

100.0%

25.1%

Total Costs

(4,133.0)

-74.2%

(3,043.9)

-70.7%

35.8%

(7,947.3)

-73.6%

(6,161.4)

-71.3%

29.0%

Gross Income

1,435.2

25.8%

1,264.2

29.3%

13.5%

2,855.7

26.4%

2,475.7

28.7%

15.4%

Selling Expenses

(1,116.3)

-20.0%

(726.2)

-16.9%

53.7%

(2,054.6)

-19.0%

(1,419.2)

-16.4%

44.8%

General and Administrative Expenses

(182.0)

-3.3%

(154.8)

-3.6%

17.5%

(376.6)

-3.5%

(291.1)

-3.4%

29.4%

Provisions for Loan Losses

(29.1)

-0.5%

(13.2)

-0.3%

120.6%

(59.1)

-0.5%

(25.6)

-0.3%

130.8%

Other Operating Revenues, Net

12.0

0.2%

13.0

0.3%

-7.7%

25.8

0.2%

28.7

0.3%

-10.1%

Equity in Subsidiaries

27.5

0.5%

(2.5)

-0.1%

-

29.9

0.3%

(2.4)

0.0%

-

Total Operating Expenses

(1,288.0)

-23.1%

(883.7)

-20.5%

45.7%

(2,434.6)

-22.5%

(1,709.6)

-19.8%

42.4%

EBITDA

147.2

2.6%

380.5

8.8%

-61.3%

421.1

3.9%

766.1

8.9%

-45.0%

Depreciation and Amortization

(172.3)

-3.1%

(96.8)

-2.2%

77.9%

(347.1)

-3.2%

(200.8)

-2.3%

72.9%

EBIT

(25.0)

-0.4%

283.7

6.6%

-108.8%

74.0

0.7%

565.3

6.5%

-86.9%

Financial Results

(94.6)

-1.7%

(144.9)

-3.4%

-34.8%

(189.0)

-1.7%

(243.9)

-2.8%

-22.5%

Operating Income

(119.6)

-2.1%

138.7

3.2%

-186.2%

(115.0)

-1.1%

321.4

3.7%

-135.8%

Income Tax and Social Contribution

57.3

1.0%

(53.6)

-1.2%

-207.1%

44.8

0.4%

(110.6)

-1.3%

-140.5%

Net Income

(62.2)

-1.1%

85.2

2.0%

-173.1%

(70.2)

-0.7%

210.8

2.4%

-133.3%

Magalu

2Q20 Earnings Release

ANNEX III

FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEET

ASSETS (R$ million)

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

CURRENT ASSETS

Cash and Cash Equivalents

1,103.5

388.9

305.7

221.8

625.7

Securities

1,878.8

2,231.3

4,448.2

238.7

441.1

Accounts Receivable - Credit Card

3,705.3

1,365.7

2,121.0

1,142.0

817.2

Accounts Receivable - Others

680.8

781.3

794.0

733.0

643.6

Inventories

4,198.2

4,075.5

3,801.8

2,885.7

2,556.3

Related Parties - Credit Card

782.6

649.2

269.5

157.4

68.2

Related Parties - Others

80.4

77.1

100.6

81.8

58.1

Taxes Recoverable

748.9

877.4

864.1

745.7

712.7

Other Assets

100.2

143.5

136.3

145.1

112.7

Total Current Assets

13,278.8

10,589.9

12,841.2

6,351.2

6,035.6

NON-CURRENT ASSETS

Securities

-

-

0.2

0.3

0.3

Accounts Receivable

10.6

14.2

16.8

11.7

11.3

Recoverable Taxes

1,185.6

1,217.5

1,137.8

1,275.5

944.6

Deferred Income Tax and Social Contribution

73.1

18.9

12.7

14.2

27.0

Judicial Deposits

656.5

599.4

570.1

518.2

480.1

Other Assets

12.1

11.3

11.0

36.4

34.7

Investments in Subsidiaries

318.6

288.0

305.1

305.0

293.6

Right of use

2,362.1

2,292.4

2,273.8

2,168.2

1,804.9

Fixed Assets

1,099.5

1,103.2

1,076.7

1,016.1

941.2

Intangible Assets

1,561.7

1,575.5

1,545.6

1,556.0

1,509.5

Total Non-current Assets

7,279.9

7,120.2

6,949.9

6,901.6

6,047.0

TOTAL ASSETS

20,558.6

17,710.1

19,791.1

13,252.8

12,082.7

LIABILITIES (R$ million)

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

CURRENT LIABILITIES

Suppliers

5,334.0

4,132.7

5,934.9

3,802.8

3,395.9

Onlendings and other deposits

639.3

235.9

-

-

-

Loans and Financing

1,650.8

6.5

10.0

313.4

43.3

Payroll, Vacation and Related Charges

329.0

263.3

354.7

349.8

302.3

Taxes Payable

206.4

176.9

352.0

208.8

174.2

Related Parties

103.4

52.8

152.1

125.6

113.1

Lease

333.8

330.6

330.6

213.1

212.6

Taxes in Installments

-

-

-

-

-

Deferred Revenue

43.1

43.0

43.0

43.0

43.0

Dividends Payable

123.6

123.6

123.6

112.0

-

Other Accounts Payable

806.2

547.0

701.7

688.2

688.4

Total Current Liabilities

9,569.4

5,912.2

8,002.6

5,856.8

4,972.6

NON-CURRENT LIABILITIES

Loans and Financing

14.0

847.4

838.9

832.7

1,120.4

Lease

2,063.7

1,981.2

1,949.8

1,991.2

1,621.3

Deferred Income Tax and Social Contribution

26.4

32.6

39.0

65.3

58.1

Taxes in Installments

-

-

-

-

-

Provision for Tax, Civil and Labor Risks

1,112.3

1,065.7

1,037.1

941.0

813.0

Deferred Revenue

328.9

342.9

356.8

370.5

384.3

Other Accounts Payable

-

-

2.0

1.8

1.9

Total Non-current Liabilities

3,545.4

4,269.8

4,223.5

4,202.4

3,999.1

TOTAL LIABILITIES

13,114.8

10,182.0

12,226.1

10,059.2

8,971.7

SHAREHOLDERS' EQUITY

Capital Stock

5,952.3

5,952.3

5,952.3

1,719.9

1,719.9

Capital Reserve

257.4

304.5

323.3

296.3

268.1

Treasury Shares

(129.1)

(175.9)

(124.5)

(80.4)

(9.5)

Legal Reserve

109.0

109.0

109.0

65.6

65.6

Profit Retention Reserve

1,301.8

1,301.8

1,301.8

434.9

546.9

Other Comprehensive Income

(13.7)

5.6

3.2

3.4

1.2

Retained Earnings

(33.7)

30.8

-

753.8

518.7

Total Shareholders' Equity

7,443.8

7,528.1

7,564.9

3,193.6

3,110.9

TOTAL

20,558.6

17,710.1

19,791.1

13,252.8

12,082.7

Magalu

2Q20 Earnings Release

ANNEX IV

FINANCIAL STATEMENTS - ADJUSTED CONSOLIDATED STATEMENT OF CASH FLOWS

ADJUSTED CASH FLOW STATEMENTS (R$ million)

2Q20

2Q19

1H20

1H19

1H20

1H21

Net Income

386.6

518.7

827.9

(64.5)

(33.7)

369.4

Effect of Income Tax and Social Contribution Net of Payment

(80.1)

128.2

(49.3)

159.5

35.4

169.1

Depreciation and Amortization

172.3

96.8

347.1

200.8

633.3

288.1

Interest Accrued on Loans

58.8

61.7

112.2

90.9

225.1

111.4

Equity Income

(27.5)

2.5

(29.9)

2.4

(58.9)

(22.4)

Dividends Received

2.6

2.1

27.4

21.2

27.4

36.9

Provision for Losses on Inventories and Receivables

56.2

204.1

(22.9)

245.3

63.7

317.2

Provision for Tax, Civil and Labor Contingencies

48.2

264.0

81.7

259.3

274.6

301.5

Gain on Sale of Fixed Assets

1.8

(0.1)

1.9

(3.0)

(0.1)

(3.2)

Recognition of Deferred Income

(13.9)

(13.1)

(27.8)

(26.0)

(55.1)

(81.5)

Stock Option Expenses

25.0

22.4

47.3

26.9

104.7

38.1

Other

-

-

-

-

-

-

Adjusted Net Income

178.8

1,155.1

453.9

1,496.1

1,619.4

1,983.2

Trade Accounts Receivable

32.7

37.7

12.1

(43.6)

(201.1)

(162.0)

Inventories

(143.7)

(57.6)

(302.1)

248.2

(1,577.0)

(475.3)

Taxes Recoverable

160.4

(1,108.0)

67.7

(1,122.5)

(276.9)

(1,182.9)

Other Receivables

2.4

66.8

(15.8)

(14.9)

(133.6)

(17.8)

Changes in Operating Assets

(1,061.1)

(932.8)

(1,838.0)

51.8

(238.1)

(2,188.5)

Trade Accounts Payable

1,201.3

2.6

(601.3)

(1,129.1)

1,937.7

226.2

Other Payables

786.2

42.8

454.4

116.0

651.2

297.5

Change in Operating Liabilities

45.4

(1,013.1)

523.7

1,987.5

(146.9)

2,588.9

Cash Flow from Operating Activities

2,218.1

139.3

68.9

(449.8)

2,019.7

668.8

Additions of Fixed and Intangible Assets

(69.5)

(124.4)

(174.9)

(204.8)

(491.6)

(447.7)

Cash on Sale of Fixed Assets

-

-

-

-

-

-

Sale of Exclusive Dealing and Exploration Right Contract

-

-

-

-

-

-

Renegotiation Payment of Exclusive Contract

-

-

-

-

-

-

Investment in Subsidiary

11.3

(385.5)

(18.6)

(400.7)

(25.0)

(397.2)

Capital Increase in Affiliated Company

-

-

-

-

-

(30.0)

Cash Flow from Investing Activities

(58.2)

(509.9)

(193.5)

(605.4)

(516.6)

(875.0)

Loans and Financing

800.0

800.0

800.0

800.0

798.9

800.0

Repayment of Loans and Financing

(14.6)

(283.4)

(18.7)

(285.6)

(340.2)

(416.1)

Changes in Other Financial Assets (Hedge)

-

-

-

-

-

-

Payment of Interest on Loans and Financing

(0.2)

(20.6)

(0.5)

(31.8)

(21.0)

(49.7)

Payment of Lease

(65.9)

(34.6)

(146.7)

(90.2)

(270.7)

(90.2)

Payment of Interest on Lease

(48.9)

(45.9)

(96.4)

(67.2)

(181.6)

(67.2)

Payment of Dividends

-

(182.0)

-

(182.0)

-

(182.0)

Treasury Shares

4.8

256.1

(87.6)

257.2

(203.3)

237.1

Proceeds from the Secondary Equity Offering

-

-

-

-

4,300.0

-

Payment of expenses with the Secondary Equity Offering

-

-

-

-

(67.6)

-

Cash Flow from Financing Activities

675.2

489.7

450.2

400.3

4,014.6

232.0

Cash, Cash Equivalents and Securities at Beginning of Period

4,635.1

1,833.4

7,144.6

2,607.4

1,952.5

1,926.6

Cash, Cash Equivalents and Securities at end of Period

7,470.2

1,952.5

7,470.2

1,952.5

7,470.2

1,952.5

Change in Cash and Cash equivalents

2,835.1

119.1

325.6

(654.9)

5,517.7

25.9

Note: The difference between the Statement of Cash Flows and the Adjusted Statement of Cash Flows derives from:

  1. the accounting treatment of marketable securities as cash and cash equivalents.
  2. the accounting treatment of credit card receivables as cash and cash equivalents.

Magalu

2Q20 Earnings Release

ANNEX V

RETURN ON INVESTED CAPITAL (ROIC) AND ON EQUITY (ROE)

INVESTED CAPITAL (R$ million)

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Working Capital

2,501.4

2,187.5

218.2

459.3

39.4

(+) Accounts Receivable

10.6

14.2

16.8

11.7

11.3

(+) Income Tax and Social Contribution deferred

73.1

18.9

12.7

14.2

27.0

(+) Taxes Recoverable

1,185.6

1,217.5

1,137.8

1,275.5

944.6

(+) Judicial Deposits

656.5

599.4

570.1

518.2

480.1

(+) Other Assets

12.1

11.3

11.0

36.4

34.7

(+) Investment In Joint Subsidiaries

318.6

288.0

305.1

305.0

293.6

(+) Right of use

2,362.1

2,292.4

2,273.8

2,168.2

1,804.9

(+) Fixed Assets

1,099.5

1,103.2

1,076.7

1,016.1

941.2

(+) Intangible Assets

1,561.7

1,575.5

1,545.6

1,556.0

1,509.5

(+) Non Current Assets

7,279.9

7,120.2

6,949.7

6,901.3

6,046.8

(-) Provision for Contingencies

1,112.3

1,065.7

1,037.1

941.0

813.0

(-) Lease

2,063.7

1,981.2

1,949.8

1,991.2

1,621.3

(-) Deferred Revenue

328.9

342.9

356.8

370.5

384.3

(-) Income Tax and Social Contribution deferred

26.4

32.6

39.0

65.3

58.1

(-) Other Accounts Payable

-

-

2.0

1.8

1.9

(-) Noncurrent operating liabilities

3,531.4

3,422.4

3,384.7

3,369.7

2,878.7

(=) Fixed Capital

3,748.5

3,697.8

3,565.0

3,531.6

3,168.1

(=) Total Invested Capital

6,249.9

5,885.3

3,783.2

3,990.9

3,207.5

(+) Net Debt

(1,317.5)

(1,766.3)

(3,905.3)

685.3

96.6

(+) Dividends Payable

123.6

123.6

123.6

112.0

-

(+) Shareholders Equity

7,443.8

7,528.1

7,564.9

3,193.6

3,110.9

(=) Total Financing

6,249.9

5,885.3

3,783.2

3,990.9

3,207.5

-

-

-

-

-

FINANCIAL EXPENSES RECONCILIATION (R$MM)

1Q19

1Q20

4Q19

3Q19

2Q19

Financial Income

45.6

42.9

22.9

96.2

479.7

Financial Expenses

(140.2)

(137.3)

(210.9)

(135.7)

(223.7)

Net Financial Expenses

(94.6)

(94.4)

(188.0)

(39.5)

256.0

Interest on prepayment of receivables: Luiza Card and third party card

53.9

60.4

93.0

93.6

122.1

Adjusted Financial Expenses

(40.6)

(34.1)

(95.0)

54.1

378.1

Taxes on Adjusted Financial Expenses

13.8

11.6

32.3

(18.4)

(128.5)

Net Adjusted Financial Expenses

(26.8)

(22.5)

(62.7)

35.7

249.5

NOPLAT AND ROIC/ROE RECONCILIATION(R$MM)

1Q19

1Q20

4Q19

3Q19

2Q19

EBITDA

143.7

332.6

499.1

501.2

379.9

Interest on prepayment of receivables: Luiza Card and third party card

(53.9)

(60.4)

(93.0)

(93.6)

(122.1)

Depreciation

(172.3)

(174.8)

(122.3)

(163.9)

(96.8)

Current and deferred taxes

58.5

(32.6)

(20.8)

(62.7)

(152.4)

Taxes on Adjusted Financial Expenses

(13.8)

(11.6)

(32.3)

18.4

128.5

Net Operating Income (NOPLAT)

(37.7)

53.3

230.7

199.4

137.1

Invested Capital

6,249.9

5,885.3

3,783.2

3,990.9

3,207.5

ROIC Annualized

-2%

4%

24%

20%

17%

Net Income

(64.5)

30.8

168.0

235.1

386.6

Shareholders Equity

7,443.8

7,528.1

7,564.9

3,193.6

3,110.9

ROE Annualized

-3%

2%

9%

29%

50%

Magalu

2Q20 Earnings Release

ANNEX VI

BREAKDOWN OF TOTAL2 SALES AND NUMBER OF STORES PER CHANNEL

Breakdown of Total Sales (R$ million)

Growth

2Q20

V.A.

2Q19

V.A.

Total

Virtual Stores

182.0

2.1%

256.8

4.5%

-29.1%

Conventional Stores

1,662.8

19.4%

3,106.1

54.0%

-46.5%

Subtotal - Physical Stores

1,844.8

21.5%

3,362.9

58.5%

-45.1%

Traditional E-commerce (1P)

4,890.6

57.1%

1,801.3

31.3%

171.5%

Marketplace (3P)

1,831.1

21.4%

582.8

10.1%

214.2%

Subtotal - Total E-commerce

6,721.7

78.5%

2,384.1

41.5%

181.9%

Total Sales

8,566.5

100.0%

5,747.0

100.0%

49.1%

Other Revenue¹

18.1

-

2.6

-

586.6%

Marketplace (3P)

(1,831.1)

-

(582.8)

-

214.2%

Gross Revenue - Retail

6,753.5

-

5,166.8

-

30.7%

Breakdown of Total Sales (R$ million)

Growth

1H20

V.A.

1H19

V.A.

Total

Virtual Stores

451.8

2.8%

499.1

4.4%

-9.5%

Conventional Stores

4,968.9

30.6%

6,214.3

54.2%

-20.0%

Subtotal - Physical Stores

5,420.8

33.4%

6,713.3

58.6%

-19.3%

Traditional E-commerce (1P)

7,745.6

47.7%

3,736.4

32.6%

107.3%

Marketplace (3P)

3,062.6

18.9%

1,015.2

8.9%

201.7%

Subtotal - Total E-commerce

10,808.2

66.6%

4,751.6

41.4%

127.5%

Total Sales

16,229.0

100.0%

11,465.0

100.0%

41.6%

Other Revenue

36.4

-

5.9

-

517.5%

Marketplace (3P)

(3,062.6)

-

(1,015.2)

-

201.7%

Gross Revenue - Retail

13,202.8

-

10,455.7

-

26.3%

  • Total Sales include gross revenue from physical stores and e-commerce plus marketplace sales

Number of stores per channel - End of the period

Growth

jun-20

Part(%)

jun-19

Part(%)

Total

Virtual Stores

195

16.9%

176

17.8%

19

Conventional Stores

910

78.7%

810

82.1%

100

Kiosk

51

4.4%

-

0.0%

51

Subtotal - Physical Stores

1,156

99.9%

986

99.9%

170

Ecommerce

1

0.1%

1

0.1%

-

Total

1,157

100.0%

987

100.0%

170

Total Sales Area (m²)

647,171

100%

585,341

100%

10.6%

2 The value of processed sales in the marketplace (GMV) from April 1 to June 30, 2020 in the amount of R $ 1,831.1 million, which are added up as total total sales in this report, was subject to Independent Limited Assurance by our external auditors and is available on our website. The other components of the quarter's total sales are within the scope of the review of the quarterly information by our independent auditors.

Magalu

2Q20 Earnings Release

ANNEX VII

LUIZACRED

Operating Indicators

Luizacred is a joint venture between Magazine Luiza and Itaú Unibanco, responsible for financing a substantial percentage of the Company's credit sales. Magalu´s main roles and responsibilities include sales, employee management and customer service, while Itaú Unibanco is responsible for funding Luizacred, drafting the credit and collections policies and managing back office activities, such as accounting and treasury.

In Jun/20, Luizacred's total card base reached 5.0 million cards issued (+7.8% versus Jun/19). In-store sales to Luiza Card customers, distinguished by their loyalty and higher purchase frequency, decreased by 43.7% in 2Q20 due to the temporary store closures beginning in late March caused by the spread of the Covid-19 pandemic in Brazil and gradually reopened during the quarter.

Luizacred's credit portfolio, including credit card, DCC and individual loans, reached R$10.6 billion at the end of 2Q20, an increase of 11.6% over 2Q19. Luiza Card's portfolio grew 13.6% to R$10.6 billion, while the DCC portfolio was R$50 million, in line with Luizacred's strategy to focus on the Luiza Card.

LUIZACRED - Key Indicators (R$ million)

2Q20

2Q19

% Chg

1H20

1H19

% Chg

Total Card Base (thousand)

4,998

4,638

7.8%

4,998

4,638

7.8%

Luiza Card Sales - In-store

880

1,562

-43.7%

2,424

2,993

-19.0%

Luiza Card Sales - Outside Magazine Luiza

4,994

4,784

4.4%

10,462

9,045

15.7%

Subtotal - Luiza Card

5,873

6,347

-7.5%

12,886

12,038

7.0%

DCC Sales

0

31

-100.0%

3

76

-96.6%

Consumer Loans Sales

1

11

-90.1%

7

24

-70.7%

Luizacred Sales - Total

5,874

6,389

-8.0%

12,895

12,138

6.2%

Card Portfolio

10,586

9,321

13.6%

10,586

9,321

13.6%

DCC Portfolio

50

194

-74.0%

50

194

-74.0%

Consumer Loans Portfolio

9

26

-64.3%

9

26

-64.3%

Portfolio

10,646

9,542

11.6%

10,646

9,542

11.6%

The granting of credit at Luizacred follows strict criteria established by Itaú Unibanco's Credit Modeling and Policies area which uses proprietary statistics models based on the Risk Adjusted Return on Capital (RAROC) model.

Magalu

2Q20 Earnings Release

Income Statement in IFRS

LUIZACRED - Income (R$ million)

2Q20

V.A.

2Q19

V.A.

% Chg

1H20

V.A.

1H19

V.A.

% Chg

Financial Intermediation Revenue

387.3

100.0%

408.7

100.0%

-5.2%

784.9

100.0%

774.4

100.0%

1.4%

Cards

379.2

97.9%

375.3

91.8%

1.0%

762.8

97.2%

701.0

90.5%

8.8%

DCC

5.0

1.3%

25.2

6.2%

-80.3%

14.5

1.8%

56.8

7.3%

-74.5%

Consumer Loans

3.1

0.8%

8.2

2.0%

-61.9%

7.6

1.0%

16.5

2.1%

-53.8%

Financial Intermediation Expenses

(312.9)

-80.8%

(394.1)

-96.4%

-20.6%

(668.9)

-85.2%

(726.8)

-93.9%

-8.0%

Market Funding Operations

(38.2)

-9.9%

(64.2)

-15.7%

-40.6%

(90.1)

-11.5%

(124.0)

-16.0%

-27.3%

Provision for Loan Losses

(274.8)

-70.9%

(329.9)

-80.7%

-16.7%

(578.8)

-73.7%

(602.8)

-77.8%

-4.0%

Gross Financial Intermediation Income

74.4

19.2%

14.6

3.6%

407.7%

116.0

14.8%

47.6

6.1%

143.7%

Other Operating Revenues (Expenses)

(32.5)

-8.4%

(27.6)

-6.7%

17.8%

(57.6)

-7.3%

(61.7)

-8.0%

-6.6%

Service Revenue

211.4

54.6%

206.6

50.5%

2.3%

441.5

56.3%

397.3

51.3%

11.1%

Personnel Expenses

(4.9)

-1.3%

(7.8)

-1.9%

-36.9%

(10.3)

-1.3%

(14.7)

-1.9%

-29.6%

Other Administrative Expenses

(190.4)

-49.2%

(174.7)

-42.7%

9.0%

(389.4)

-49.6%

(343.2)

-44.3%

13.5%

Depreciation and Amortization

(3.0)

-0.8%

(3.0)

-0.7%

0.7%

(6.0)

-0.8%

(5.9)

-0.8%

1.1%

Tax Expenses

(34.5)

-8.9%

(34.0)

-8.3%

1.3%

(69.8)

-8.9%

(64.4)

-8.3%

8.5%

Other Operating Revenues (Expenses)

(11.0)

-2.8%

(14.7)

-3.6%

-25%

(23.6)

-3.0%

(30.8)

-4.0%

-23.4%

Income Before Tax

41.9

10.8%

(12.9)

-3.2%

-424.2%

58.4

7.4%

(14.1)

-1.8%

-514.2%

Income Tax and Social Contribution

(16.9)

-4.4%

5.0

1.2%

-440.7%

(23.8)

-3.0%

5.2

0.7%

-553.8%

Net Income

25.0

6.4%

(8.0)

-1.9%

-414.0%

34.6

4.4%

(8.8)

-1.1%

-490.7%

Income Statement in compliance with accounting practices established by the Brazilian Central Bank

LUIZACRED - Income (R$ million)

2Q20

V.A.

2Q19

V.A.

% Chg

1H20

V.A.

1H19

V.A.

% Chg

Financial Intermediation Revenue

387.3

100.0%

408.7

100.0%

-5.2%

784.9

100.0%

774.4

100.0%

1.4%

Cards

379.2

97.9%

375.3

91.8%

1.0%

762.8

97.2%

701.0

90.5%

8.8%

DCC

5.0

1.3%

25.2

6.2%

-80.3%

14.5

1.8%

56.8

7.3%

-74.5%

Consumer Loans

3.1

0.8%

8.2

2.0%

-61.9%

7.6

1.0%

16.5

2.1%

-53.8%

Financial Intermediation Expenses

(351.0)

-90.6%

(322.5)

-78.9%

8.8%

(677.9)

-86.4%

(594.3)

-76.7%

14.1%

Market Funding Operations

(38.2)

-9.9%

(64.2)

-15.7%

-40.6%

(90.1)

-11.5%

(124.0)

-16.0%

-27.3%

Provision for Loan Losses

(312.9)

-80.8%

(258.3)

-63.2%

21.1%

(587.8)

-74.9%

(470.3)

-60.7%

25.0%

Gross Financial Intermediation Income

36.3

9.4%

86.2

21.1%

-57.9%

107.0

13.6%

180.0

23.3%

-40.6%

Other Operating Revenues (Expenses)

(32.5)

-8.4%

(27.6)

-6.7%

17.8%

(57.6)

-7.3%

(61.7)

-8.0%

-6.6%

Service Revenue

211.4

54.6%

206.6

50.5%

2.3%

441.5

56.3%

397.3

51.3%

11.1%

Personnel Expenses

(4.9)

-1.3%

(7.8)

-1.9%

-36.9%

(10.3)

-1.3%

(14.7)

-1.9%

-29.6%

Other Administrative Expenses

(190.4)

-49.2%

(174.7)

-42.7%

9.0%

(389.4)

-49.6%

(343.2)

-44.3%

13.5%

Depreciation and Amortization

(3.0)

-0.8%

(3.0)

-0.7%

0.7%

(6.0)

-0.8%

(5.9)

-0.8%

1.1%

Tax Expenses

(34.5)

-8.9%

(34.0)

-8.3%

1.3%

(69.8)

-8.9%

(64.4)

-8.3%

8.5%

Other Operating Revenues (Expenses)

(11.0)

-2.8%

(14.7)

-3.6%

-25%

(23.6)

-3.0%

(30.8)

-4.0%

-23.4%

Income Before Tax

3.8

1.0%

58.7

14.4%

-93.5%

49.4

6.3%

118.3

15.3%

-58.3%

Income Tax and Social Contribution

(1.7)

-0.4%

(23.7)

-5.8%

-92.9%

(20.2)

-2.6%

(47.7)

-6.2%

-57.6%

Net Income

2.1

0.5%

35.0

8.6%

-93.9%

29.1

3.7%

70.6

9.1%

-58.7%

Comparative: IFRS x Brazilian Central Bank

R$ milhões

2Q20

V.A.

2Q19

V.A.

% Chg

1H20

V.A.

1H19

V.A.

% Chg

Provision for Loan Losses

(38.1)

-9.8%

71.6

17.5%

-

(9.0)

-1.1%

132.4

17.1%

-

Income Tax and Social Contribution

15.2

3.9%

(28.6)

-7.0%

-

3.6

0.5%

(53.0)

-6.8%

-

Net Income

(22.8)

-5.9%

43.0

10.5%

-

(5.4)

-0.7%

79.5

10.3%

-

Magalu

2Q20 Earnings Release

Revenue from Financial Intermediation

In 2Q20, financial intermediation revenues reached R$387.3 million, 5.2% lower than in 2Q19. This was primarily driven by the drop in Luiza Card billing within Magalu, due to the temporary closure of physical stores, and the lower revenue growth outside Magalu, due to the reduced volume of customer spending caused by social isolation.

Provision for Loan Losses

Loans overdue from 15 days to 90 days (NPL 15) represented only 2.7% of the total portfolio in Jun/20, improving 0.5 p.p. compared to Jun / 19 and 0.6 p.p. compared to Mar/20, due to a conservative credit policy and major collection efforts by stores and the Company's collection department.

The percentage of the portfolio overdue for more than 90 days (NPL 90) was 9.7% in Jun/20, an increase of only 1.2 p.p. compared to Jun/19. This was due in large part to the temporary store closures which hindered customers' ability to make payments.

With the gradual reopening of stores over the course of 2Q20, the receipt of payments increased substantially, reaching pre- pandemic levels and minimizing the impact on default indicators and provisions. This generated a notable improvement in the short-term overdue portfolio.

Provisions for loan losses represented 2.6% of the total portfolio in 2Q20, a reduction from 3.5% in 2Q19. It is worth noting that the lower short-term delinquency rates in the quarter also led to a reduction in IFRS provisions during the period.

The portfolio's coverage ratio was 161% in Jun/20 compared to 168% in Jun/19.

PORTFOLIO - OVERDUE

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

000 to 014 days

9,318

87.5%

10,229

88.6%

10,322

89.4%

9,151

88.5%

8,428

88.3%

015 to 030 days

48

0.4%

112

1.0%

67

0.6%

65

0.6%

70

0.7%

031 to 060 days

62

0.6%

115

1.0%

81

0.7%

88

0.9%

91

1.0%

061 to 090 days

183

1.7%

151

1.3%

128

1.1%

122

1.2%

141

1.5%

091 to 120 days

182

1.7%

122

1.1%

123

1.1%

133

1.3%

124

1.3%

121 to 150 days

151

1.4%

117

1.0%

116

1.0%

118

1.1%

140

1.5%

151 to 180 days

129

1.2%

113

1.0%

110

1.0%

122

1.2%

107

1.1%

180 to 360 days

573

5.4%

592

5.1%

602

5.2%

536

5.2%

440

4.6%

Portfolio (R$ million)

10,646

100%

11,551

100%

11,549

100%

10,336

100%

9,542

100%

Receipt expectation of loan portfolio overdue

160

147

133

126

120

above 360 days

Total Portfolio in IFRS 9 (R$ million)

10,806

11,697

11,682

10,462

9,661

Overdue 15-90 days

292

2.7%

378

3.3%

275

2.4%

275

2.7%

302

3.2%

Overdue Above 90 days

1,036

9.7%

944

8.2%

951

8.2%

910

8.8%

811

8.5%

Total Overdue

1,328

12.5%

1,322

11.4%

1,227

10.6%

1,185

11.5%

1,113

11.7%

Provisions for loan losses on Portfolio

1,361

1,362

1,335

1,260

1,097

Provisions for loan losses on available limit

302

293

280

279

265

Total Provisions for loan losses in IFRS 9

1,662

1,655

1,614

1,539

1,363

Coverage of Portfolio (%)

131%

144%

140%

138%

135%

Coverage of Total Portfolio (%)

161%

175%

170%

169%

168%

Note: in order to facilitate comparability and analysis of NPL performance, the Company now discloses the breakdown of the portfolio by arrears criterion, while it continues disclosing the portfolio breakdown by risk level to the Central Bank.

Magalu

2Q20 Earnings Release

Financial Intermediation Gross Results

Gross margin from financial intermediation totaled 19.2% in 2Q20 (15.6 p.p. YoY), mainly influenced by a reduction in the short- term overdue portfolio and, consequently, a lower volume of IFRS provisions.

Other Operating Revenues (Expenses)

Other operating expenses totaled R$32.5 million in 2Q20, an increase of 17.8% YoY, due to the decelerating growth in service revenue caused by the Covid-19 pandemic.

Luizacred's operating efficiency ratio was stable at 40% in 2Q19 even with the decrease in revenue caused by the pandemic.

Operating Income and Net Income

In 2Q20, Luizacred recorded operating income of R$41.9 million, equivalent to 10.8% of financial intermediation (+14p.p. YoY). In 2Q20, Luizacred's net profit reached R$25.0 million with a Return On Equity (ROE) of 16.3%.

In compliance with accounting practices established by the Brazilian Central Bank, considering the minimum provisions of Law 2682, Luizacred's net income totaled R$2.1 million in 2Q20.

Shareholders' Equity

In compliance with the same practices, Luizacred posted shareholders' equity of R$921.2 million in Jun/20. As a result of adjustments required under IFRS, specifically additional provisions for expected losses, net of taxes, Luizacred's shareholders' equity for the purposes of Magazine Luiza's financial statements came to R$625.5 million.

Magalu

2Q20 Earnings Release

EARNINGS VIDEO CONFERENCE

Video Conference in Portuguese/English (with simultaneous translation)

Tuesday, Aug 18th, 2020

11:00 - Brasilia time 10:00 - New York time (EST)

Video Conference in English

HD Web Phone:

Access HD Magalu

Participants from the US or other countries:

Dial in #: +1 412 717 9627

CODE: Magazine Luiza

Twitter:

@ri_magalu

Investor Relations

Roberto Bellissimo Rodrigues

Simon Olson

Vanessa Rossini

Kenny Damazio

Lucas Ozório

CFO and IR Director

Director IR and

IR Manager

IR Coordinator

IR Analyst

New Business

Phone: +55 11 3504-2727

ri@magazineluiza.com.br

About Magazine Luiza

Magazine Luiza, or Magalu, is a technology and logistics company focused on the retail sector. From its humble origins as a traditional retailer providing electronics and home appliances to Brazil's rising middle class, the company has since transformed into a technology powerhouse providing a wide array of products to Brazilians of all classes. Magalu has one of the largest geographic footprints with twenty one distribution centers serving a network of over 1.150 stores in 18 states. At the heart of the company's success is an omnichannel retail platform capable of reaching customers via mobile app, web and physical stores. A large part of the company's success is attributable to its in-house development team, Luizalabs, which consists of over 1,300 engineers and product development specialists. Among other things, engineers from Luizalabs use technologies such as big data and machine learning to create logistics, fintech and inventory apps which remove friction from the retail process, improving margins, delivery times and customer experience. The company has been at the forefront of e-commerce adoption in Latin America and has a profitable 1P e-commerce business and a thriving 3P marketplace. Magazine Luiza has also been a logistics pioneer. The company's integrated online and offline logistics operations enable it to leverage its physical presence to radically reduce delivery times and costs in a sustainable way. The result is the fastest, lowest cost logistics network in Brazil.

EBITDA, Adjusted EBITDA and Adjusted Net Income

EBITDA (earnings before interest, income and social contribution taxes, financial income and expenses, depreciation and amortization) is not a financial performance measure under the accounting practices adopted in Brazil. Because it does not consider expenses intrinsic to the business, EBITDA has limitations that affect its use as a profitability or liquidity indicator. EBITDA should not be considered an alternative to net income or operating cash flow. In addition, EBITDA does not have a standard meaning, and our definition may not be comparable with the definitions adopted by other companies. Non-recurring results used to calculate adjusted EBITDA and adjusted net income should not be considered an alternative to EBITDA and net income in accordance with the accounting practices adopted in Brazil.

Disclaimer

The statements herein related to business prospects, future estimates of operating and financial results, and those related to Magazine Luiza's growth prospects are merely estimates and, as such, are based solely on the expectations of the Executive Board regarding the future of the Company's business. These expectations largely depend on approvals and licenses for the projects, market conditions, performance of the Brazilian economy, the sector and the international markets and are, therefore, subject to changes without prior notice. This performance report includes accounting and non-accounting data such as pro forma operating and financial results and projections based on the expectations of the Company's Management. The non-accounting data were not reviewed by the Company's independent auditors.

Disclaimer

Magazine Luiza SA published this content on 17 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2020 22:22:05 UTC


© Publicnow 2020
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Financials
Sales 2021 37 562 M 7 110 M 7 110 M
Net income 2021 809 M 153 M 153 M
Net cash 2021 2 421 M 458 M 458 M
P/E ratio 2021 155x
Yield 2021 0,19%
Capitalization 108 B 20 535 M 20 502 M
EV / Sales 2021 2,82x
EV / Sales 2022 2,26x
Nbr of Employees 40 000
Free-Float 42,5%
Chart MAGAZINE LUIZA S.A.
Duration : Period :
Magazine Luiza S.A. Technical Analysis Chart | MGLU3 | BRMGLUACNOR2 | MarketScreener
Technical analysis trends MAGAZINE LUIZA S.A.
Short TermMid-TermLong Term
TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 13
Last Close Price 16,34 BRL
Average target price 27,31 BRL
Spread / Average Target 67,2%
EPS Revisions
Managers and Directors
Frederico Trajano Inácio Rodrigues Chief Executive Officer
Roberto Bellissimo Rodrigues Chief Financial Officer & IR Officer
Luiza Helena Trajano Inácio Rodrigues Chairman
André Luiz de Souza Fatala Chief Technology Officer
Fabrício Bittar Garcia Vice President-Operations & Commercial
Sector and Competitors