Lojas Quero-Quero (LJQQ3) Q2 2024 earnings summary

Executive summary

• Second quarter 2024 showed improvement over a tough start to the year, with notable recovery despite severe floods in Rio Grande do Sul impacting operations and communities.

• Opened 10 new stores in 2Q24, reaching 562 stores, focusing on smaller cities for faster payback and cash flow stability.

• Operates 562 stores as of June 2024, with 147 new stores added in the last 3 years, mainly in small and medium cities in southern Brazil, Mato Grosso do Sul, and São Paulo.

• Strong community support and employee engagement during the floods, including donations and sales at cost to affected customers.

• Business model combines retail of building materials, appliances, and furniture with financial services, including the VerdeCard credit card.

Financial highlights

• Gross revenue grew 14.3% year-over-year to R$736.6 million in Q2, with same-store sales up 10.3%, and LTM gross revenue at R$2,865 million.

• Net operating revenue rose 13.9% year-over-year to R$638.3 million.

• Adjusted EBITDA reached R$13 million for the quarter, up from R$5 million last year; adjusted EBITDA margin at 1.9%.

• Adjusted net income for the half-year was BRL 25 million, up from BRL 19 million year-over-year; reported net loss of R$56.4 million in Q2, impacted by R$41.2 million in tax credit reversals.

• Financial services revenue grew 20%, and credit card revenue increased 8% year-over-year.

Outlook and guidance

• Expectation of continued operational leverage and cash generation in the second half, following historical seasonality.

• Uncertainty remains regarding the full economic impact of the floods in Rio Grande do Sul and future market performance.

• Delinquency rates expected to remain controlled, with no major changes in credit policy anticipated.

• Macroeconomic environment remains challenging, with interest rates not declining as previously hoped.

• Management expresses confidence in gradual and sustainable retail recovery, supported by solid financial services performance.