Grupo Casas Bahia (BHIA3) Q2 2024 earnings summary

Executive summary

• Achieved positive free cash flow of R$92 million in Q2 2024, the best first-half free cash flow in five years, driven by disciplined inventory management and Transformation Plan execution.

• Transformation Plan in its first year focused on profitability, cost reduction, operational efficiency, and debt reprofiling, with significant progress in stock health and channel optimization.

• Strategic shift to core, profitable categories and specialist positioning, exiting 23 non-core categories and prioritizing profitable channels.

• Closed 60 loss-making stores and discontinued 23 categories, migrating them from 1P to 3P.

• Net profit for the semester includes a non-recurring gain from debt reprofiling, impacting reported results by over R$600 million.

Financial highlights

• Net revenue was R$6.48 billion, down 13.5% year-over-year, mainly due to operational decisions and focus on profitability.

• Gross margin improved to 30.7%, up 1.5 percentage points year-over-year, with disciplined expense management leading to a 9.1% reduction in operating expenses.

• Adjusted EBITDA margin reached 7.0% in Q2'24, up from 6.3% last year and 6.1% in Q1, marking six consecutive quarters of improvement.

• Net income turned positive at R$37 million in Q2'24, compared to a net loss of R$492 million in Q2'23.

• Free cash flow was R$92 million in Q2'24; liquidity stable at R$2.9 billion; inventory reduced by R$1.4 billion year-over-year, with 92% of inventory under 90 days.

Outlook and guidance

• Focus remains on improving cash flow and operational margins each quarter, with gradual, step-by-step progress expected.

• Physical stores prioritized for growth in 2H 2024, with digital channel profitability and growth targeted for 2025.

• Transformation Plan initiatives expected to drive further gains in efficiency and profitability, with selective investments to strengthen key categories and channels.

• Buy Now, Pay Later product and services expected to drive incremental margin and growth, with disciplined expansion.

• Transformation plan aims for R$2.5 billion in benefits, with ongoing leverages and selective investments.