2020 Retrospective – Retail

Summary:

The Brazilian retail sector suffered unprecedentedly in 2020 – facing the pandemic head-on, seeing sales plummet, stores close, and foot traffic decrease. It also experienced, from June onwards, a surge in sales and growing e-commerce, stepping out of its comfort zone to implement innovative projects that had been shelved. But what about your retail business? Check out the retrospective of the year for this very special sector.

Monthly Data Analysis

In January 2020, retail was experiencing its honeymoon period, lasting 10 months, with a 1.3% increase in sales compared to the same month in the previous year and the 10th consecutive positive growth rate. The furniture and appliances sector stood out, with an 11% increase compared to the same month the previous year. However, in January, a trend of retail slowdown was already noticeable (as shown in Figure 1 below), with a seasonal adjustment and normalized in relation to the maximum sales recorded in 2014, as shown by the fixed base index*:

February was a standout month, with a 4.7% increase in sales volume compared to the same month the previous year, and a 1.2% increase compared to the previous month. The furniture and appliances sector once again dragged the retail average upwards, with an 11.7% increase compared to the first month of the previous year.

“Month of uncertainty” – that’s the best definition for March. The coronavirus gave its first signs on Brazilian territory, and the crisis in Europe was already indicating what Brazil should expect in the coming months. Consumer behavior began to be impacted by the news, resulting in a 2.5% drop compared to the previous month and a 1.2% drop compared to March 2019, breaking a streak of 11 consecutive months of growth.

In April, social distancing began to be implemented in Brazil. Travel, work, and studies were put on hold, small businesses began to have payroll issues, and consumption plummeted, impacting the IPCA, which fell by -0.31%. In the stock market, the retail sector also suffered. The XPMalls shopping center fund fell by 31.49% from March to April, and another important fund, CSHG Brasil Shopping, fell by 24.56% in the same period, already pricing in the drop in revenue for the following months. The sales volume showed a 16.8% drop compared to March, and year-to-date, the decline was 3% compared to the first four months of the previous year.

May showed a 'V' shaped recovery, with a 13.9% increase compared to the previous month. Despite the increase, retail still recorded a 7.2% loss compared to the same month in the previous year. Figure 2 summarizes this sales volume:

In June, the growth and 'V' shaped recovery trend continued, with a 9.1% increase from the previous month and 0.5% compared to the same month the previous year. Figure 3 shows a rapid 'V' shaped recovery in the first 3 months after the bottom recorded in April.

July was the month with the highest number of Covid-19 deaths so far, with 32,912 lives lost. Despite the virus impacting mobility and imposing strict hygiene rules and reduced capacity in retail, it reinvented itself. New sales channels were activated, and a new growth of 5.2% compared to the previous month was recorded, with a 5.5% increase compared to the same period the previous year. For the year-to-date, the decline was only 2% compared to the same period in the previous year. The textile, clothing, and footwear sector stood out, with a 25.2% increase in sales.

August recorded a 3.2% increase in sales compared to July. Compared to the same month of the previous year, there was another increase of 6.6%. The accumulated decline was just -0.9% compared to the accumulated total of the previous year. This month also highlighted the clothing and footwear trade, with a 30.5% increase in sales compared to the previous month.

September saw a 0.6% increase compared to the previous month and a 7.3% increase compared to the previous year. A sharp slowdown in sales growth was noticed, as shown in Figure 4:

It’s interesting to analyze these same data through the Expanded Retail Index – ICVA, produced by Cielo. The index showed the growth of nominal sales revenue in the expanded retail sector for the period, comparing it with the same period in the previous year without the calendar effects that impact specific months/periods when compared to the same month/period the previous year. According to the Cielo index, sales are still suffering in comparison with the previous year, as shown in Figure 5:

Next Chapters – Points of Attention

An inflationary pressure begins to be felt, as shown in the following graph:

October’s inflation stood at 0.86%, the highest increase for the month since 2002, largely driven by food prices. This is already impacting the purchasing power of Brazilians. Another point to watch for the future is public debt, which has reached nearly 100% of GDP, as shown in the following graph, with deteriorating debt quality:

Conclusion

The year 2020 was undoubtedly atypical, with many difficult months. Although the impact on sales was strong, it’s important to emphasize that Brazilian retail proved to be resilient, adaptable, and capable of reinventing itself. Furthermore, it’s worth highlighting the positive impact the crisis had on businesses in terms of digitalization of processes and operational efficiency.

Personally, I’m proud to be part of this digitalization wave and to work hard for a more robust, intelligent, and omnichannel retail sector. You can count on me and AlterVision to drive this revolution.

Compare the nominal and volume levels of Gross Revenue of Resale for the month with the monthly average obtained in 2014.

Sources:

https://ri.cielo.com.br/informacoes-financeiras/indice-cielo-do-varejo-ampliado-icva/

https://www.ibge.gov.br/estatisticas/economicas/comercio.html

https://conteudos.xpi.com.br/economia/a-divida-publica-brasileira-e-a-solvencia-do-tesouro-direto/