By Brazil Stock Guide – Magazine Luiza SA (MGLU3) swung to a net loss of R$10.7 million in the third quarter of 2026, reversing a R$84.6 million profit a year earlier, as e-commerce sales fell 9.8% despite a 10% increase at physical stores. October figures showed accelerating growth in both channels, according to the Brazilian retailer’s quarterly earnings release.
On an adjusted basis, Magazine Luiza, commonly known as Magalu, reported a net profit of R$13.9 million, down 34.6% from R$21.2 million in the same period of 2025. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) reached R$710.1 million, virtually unchanged from R$711.4 million a year earlier, while the adjusted EBITDA margin remained stable at 7.9%.
The results highlight a divergence between the company’s improving physical retail operations and continued weakness in digital sales. Still, management pointed to signs of a broader recovery as industry consolidation and new distribution partnerships help the retailer gain market share.
Revenue declines as physical stores outperform e-commerce
Magazine Luiza recorded total sales of R$14.56 billion in the July-to-September period, a 3.6% decline from R$15.1 billion a year earlier. The figure includes merchandise sold through physical stores, first-party e-commerce operations and third-party marketplace sellers.
Net revenue decreased 0.9% to R$8.94 billion, while gross revenue slipped 0.5% to R$11.27 billion.
Physical stores remained the company’s strongest sales channel, generating R$5.21 billion in sales, up 10% year over year. Same-store sales increased 9.5%, compared with 5.2% growth in the third quarter of 2025.
Online operations continued to face pressure. Total e-commerce sales fell to R$9.34 billion from R$10.36 billion a year earlier.
First-party online sales, which represent products sold from Magazine Luiza’s own inventory, declined 8.6% to R$5.86 billion. Marketplace sales dropped 11.9% to R$3.48 billion.
E-commerce accounted for 64.2% of total sales, down from 68.6% in the corresponding quarter of 2025, reflecting the growing contribution of physical stores.
October sales accelerate as competitive landscape changes
Preliminary October figures indicated a significant improvement in Magazine Luiza’s operating performance.
Physical-store sales growth accelerated from an average of 8% between January and August to 12% in September and 16% in October, compared with the corresponding periods of 2025.
The recovery was particularly pronounced in first-party e-commerce, where sales shifted from declines of approximately 12% earlier in the year to growth of 5% in September and 14% in October.
The company attributed the improvement partly to consolidation in Brazil’s consumer durable goods market, where reduced competition and store closures have redirected demand toward established retailers.
Management said the changing competitive environment has also reduced pressure on online advertising costs since August, allowing Magalu to capture additional sales without proportionately increasing marketing expenditure.
According to the company, its market share in major durable goods categories increased by 1.5 percentage points in slightly more than a month. Sales growth in these categories exceeded that of the broader market by more than 20 percentage points.
The retailer expects its existing logistics infrastructure and store network to help capture additional demand without requiring significant investment in new physical locations.
Partnerships with Amazon, MercadoLibre and Shopee support digital strategy
Magazine Luiza has expanded its distribution strategy by placing products from its own inventory on competing e-commerce platforms.
The company began selling through Amazon Brazil, operated by Amazon.com Inc. (AMZN), in June, followed by MercadoLibre Inc. (MELI) in September. A similar agreement with Shopee, owned by Sea Ltd. (SE), was announced in October.
The partnerships allow Magalu to reach customers beyond its proprietary digital channels while retaining control of inventory and fulfillment through its logistics subsidiary, Magalog.
Management said sales through partner marketplaces have exceeded initial expectations and generate higher contribution margins than sales acquired through paid advertising on Magalu’s own platforms.
The company views logistics as a key competitive advantage, particularly in large household appliances, furniture and televisions, where transportation requirements are more complex.
Magalog operates a nationwide network of more than 200 distribution centers and cross-docking facilities, supporting next-day deliveries in major Brazilian cities.
Margins remain stable despite weaker sales
Magazine Luiza’s gross margin increased slightly to 31.6% in the third quarter from 31.5% a year earlier, reflecting a higher contribution from financial services and tighter cost management.
Gross profit totaled R$2.83 billion, down 0.6% from the corresponding period of 2025.
Selling expenses declined 3.2% to R$1.68 billion, representing 18.8% of net revenue, compared with 19.2% a year earlier.
General and administrative expenses decreased 3.1% to R$344.5 million.
The company reduced combined selling, general and administrative expenses by approximately R$65.9 million year over year.
However, provisions for doubtful accounts increased 47.9% to R$166.6 million, offsetting part of the benefit from lower operating costs.
Adjusted net financial expenses amounted to R$482.6 million, down 1.1% from R$488.1 million in the previous year.
On a reported basis, EBITDA declined 14.8% to R$687.9 million, compared with R$807.4 million in the third quarter of 2025.
The difference between adjusted and reported earnings reflects nonrecurring items, including provisions for risks, restructuring expenses and financial adjustments.
Cash position reaches R$5.7 billion as debt declines
Magazine Luiza ended September with a total liquidity position of R$5.66 billion, including R$2.05 billion in cash and financial investments and R$3.62 billion in available credit card receivables.
Operating cash flow reached R$332.5 million in the third quarter, compared with R$534.6 million a year earlier.
The retailer increased inventories by approximately R$378 million during the quarter as it prepared for Black Friday and Christmas shopping.
Gross debt stood at R$5.16 billion at the end of September, down from R$5.95 billion a year earlier.
The company reported adjusted net cash of R$503.8 million, compared with R$1.60 billion in September 2025.
In October, Magazine Luiza completed the final R$1 billion payment associated with its 10th debenture issuance, an additional step in its debt reduction strategy.
Capital expenditure fell 29% to R$194.7 million during the quarter, with technology accounting for approximately 81% of total investments.
Luizacred profit rises as financial services expand
Magazine Luiza’s financial services operations remained an important contributor to profitability.
Luizacred, the company’s credit card joint venture, reported net income of R$77.8 million in the third quarter, an increase of 14.4% from a year earlier.
The business maintained a credit portfolio of approximately R$19.9 billion and processed R$14.9 billion in credit card transactions during the period.
Credit quality indicators improved, with the proportion of loans more than 90 days overdue declining to 7.3%, compared with 8% in September 2025.
The credit card base totaled 5.6 million cards at the end of September.
Meanwhile, Magalupay SCFI, the group’s financial institution, recorded quarterly net profit of R$32.3 million and an annualized return on equity of 50.8%.
Its gross credit portfolio reached R$838.5 million, while the net portfolio totaled R$767 million.
The institution originated R$444.5 million in consumer credit during the quarter and expanded its funding base through bank deposits and the issuance of financial instruments.
Magazine Luiza has shifted all new consumer credit origination at its physical stores to Magalupay SCFI, a move designed to improve profitability and provide greater control over financing operations.
The company’s consortium business also recorded 39% year-over-year sales growth, reaching R$2.4 billion in the quarter.
Cloud and artificial intelligence investments advance
Beyond retail and financial services, Magazine Luiza continued developing its technology businesses.
Magalu Cloud, the company’s Brazilian cloud computing platform, expanded its external customer base to approximately 2,300 clients.
The operation received an initial R$100 million tranche of financing from Brazil’s national development bank, BNDES, to support research and development.
During the quarter, Magalu launched its MGC AI Hub, a marketplace for artificial intelligence models, and established a partnership with Alibaba Cloud, part of Alibaba Group Holding Ltd. (BABA), to expand generative AI services in Brazil.
Technology investments remained the largest component of the company’s capital expenditure, totaling R$157.1 million in the third quarter.
Despite the improvement in quarterly operating trends, Magazine Luiza remained in the red over the first nine months of 2026. The retailer reported an accumulated net loss of R$138.4 million, compared with a R$73 million profit in the same period of 2025. On an adjusted basis, the nine-month loss totaled R$70.4 million, reversing an adjusted profit of R$34.2 million a year earlier.
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