SAO PAULO, April 15 (Reuters) - Via Varejo SA, one of Brazil’s largest appliance retailers, is seeking to suspend rent payments for over 1,020 stores to help offset a 50% revenue drop, two people with knowledge of the matter said.
One of the people said the company has already reached an agreement with some landlords and expects to get group agreements with other retailers that would exempt it from paying rent on its stores located in malls for as long as they are shut by the coronavirus lockdowns.
The first source said the rent holiday request was also made to billionaire chairman Michael Klein, the largest shareholder in the business who also owns dozens of stores rented by the company.
Via Varejo would save 80 million reais ($15 million) a month if all landlords accept the waiver, the second source said, asking for anonymity to disclose private talks.
Although still weak, the company’s sales have improved since the lockdown began as the company took steps to increase online sales, which according to one of the sources represented about 30% of total sales at that time.
In the second week of the lockdown, the retailer launched software it was already working on to allow sales personnel to contact consumers through social media to help them with online orders. That eased the decline in revenue to 50% from a previous 70%, one of the sources said.
Via Varejo declined to comment.
The retailer, which was in the midst of an overhaul of operations when it and the rest of the sector were sideswiped by the widespread store closings forced by efforts to combat the novel coronavirus, is also delaying payments to some contractors.
The company has deferred payments to indirect suppliers such as cleaning and security firms, according to a memo from the company to its suppliers seen by Reuters.
“We are postponing our entire payment schedule by one month, and at least 75 days after invoice issuance,” the company said, saying payments due between April 3 and 30 will be postponed ton May 5. One of the sources close to the company said Via Varejo decided to unify three monthly payments dates into a single date, and that caused the delay.
Transportation companies are being spared, as they are key to delivering online sales, a supplier said.
Direct suppliers, such as electronics makers, are being paid on time, but Via Varejo is not increasing its inventory, two people with knowledge of ongoing talks between the company and manufacturers told Reuters.
“The orders mix has changed and retailers are now buying lighter electronics such as vacuum cleaners or air fryers”, an industry source said, citing new consumer demand patterns amid the lockdown.
Via Varejo shares have lost nearly half their value so far this year, underperforming Brazil’s benchmark Bovespa index, which is down about a third over the same period.
$1 = 5.1994 reais Reporting by Tatiana Bautzer and Gabriela Mello; Editing by Christian Plumb and Elaine Hardcastle
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