Retail lives its winter, but in day trade, life goes on

Brazilian commerce has been going through a difficult moment, christened by financial market specialists the “winter of the retail”.

The problem is related to a scenario of lasting crisis. In 2019, there was the expectation of economic growth in Brazil and in the world. But in 2020, the coronavirus pandemic Covid-19which only ended at the end of 2021, caused damage to various sectors of the economy.

At the same time, other crises arose, such as a quasi-war between Will It is U.San intense trade fight between the Americans and the Chinese with retaliation coming from both sides, the oil crisis and, when everything seemed to be part of the past, behold, the Russia invades the Ukraine.

Well, if the bad international scenario wasn’t enough, Brazil generated its own turmoil. The troubled electoral period and populist measures of the previous government in an attempt to win the elections harmed the public accounts.

All in all, the economy weakened. Jobs were lost and low-paid or informal jobs were created in their place. A inflation upward ate part of the purchasing power and the rate Selic at 13.75% per annum, consumer and business credit became more expensive.

The result is that now, we have a public power with few cash resources, millions of consumers and companies in default and, consequently, a much lower than expected consumption and little credit offer.

We all know that Brazilian consumption depends a lot on the supply of credit. But how to borrow money if it is difficult to pay installments of financing already carried out?

In short, the perspective is that retail companies will suffer this year with sales below what they had planned.

After all, they depend on the financial system to release credit whose supply is reduced for new contracts because banks, finance companies and fintechs need to focus their efforts on renegotiating previously made loans.

And if retail tends to sell less, it will certainly profit less. And the investor who likes to invest in shares of companies in this sector has to pay attention to the movement.

On March 20, the shares of the Renner (LREN3) had a negative variation of 14.69% in 2023 and -25.83% in 52 weeks. A Marisa (LOVE3) decrease, respectively, of -45.6% in the year and -76.94% in 12 months, and the Via (VIIA3), negative results of -15% and -42.53%, considering the same periods.

O Magalu (MGLU3) is the best-off retailer. Its shares show appreciation of 37.22% in 2023, but in the accumulated of one year it is still negative at 35.39%, that is, it still has a lot to recover.

Does this mean that retail stocks are best forgotten? Obviously not. In general, they are strong companies damaged by a bad economic scenario, but which tend to recover as soon as macroeconomic issues are resolved.

As everyone knows, it’s downtown when you go shopping. The question here is to measure, individually, if the shares will devalue even more or if they will start to appreciate in order to know the exact time to buy.

Those who are already positioned, it is advisable to act in the same way to buy again at the right time and thus recover current losses by the future high average. Selling now is assuming the loss.

That’s roughly speaking for those who invest more in the long term. For those who do day trades, little changes. Winter exists in the same way, however, risking the daily ups and downs, even if at the end of the trading session the stock has lost value, the trader has the opportunity to profit by intelligently taking advantage of a bullish window that has occurred.

In other words, for those who know how to speculate, life goes on. For the others, it takes increased attention to market movements and a strong heart.