Carrefour Brasil estimates BRL 2.1 billion to change a third of BIG stores

Carrefour Brasil expects investments and expenses of R$ 2.1 billion for the conversion of around one third of the stores acquired from Grupo Big.

The information was released over the weekend and detailed on Monday by company executives. The acquisition of Big by Carrefour Brasil creates a behemoth of BRL 104 billion in gross sales, based on 2021 numbers, and was completed in early June.

Of the 374 Big stores acquired, a number that already excludes those that will be sold by determination of Cade (Administrative Council for Economic Defense), 122 will be converted into other brands or formats —Carrefour talks about 124 conversions, since two BIG stores to be transformed into Sam’s Club will become a hypermarket and club.

Carrefour Brasil will transform 38 points of Maxxi Atacado, 4 Todo Dia and 28 BIG hypermarkets into Atacadão, the largest cash and carry store in the country. In addition, another 47 BIG stores will become Carrefour hypermarkets and another seven will be converted into Sam’s Club.

Carrefour Brasil will carry out an annual analysis of its stores to assess the need for new conversions in the future, said the group’s president, Stéphane Maquaire, in a conference with analysts. The supermarkets acquired from BIG, such as the brands Nacional and Bompreço, will initially not undergo conversions.

The conversions should be completed by the end of next year, and in 89 of them — those that are only for flags, and not for format, such as from Maxxi to Atacadão, for example — the stores will be closed for just three days. The remaining 35 transformations will require point closure for two months.

The expectation is that the transformations generate margin gains for Carrefour Brasil. Maxxi Atacado has a margin of 4% to 6%, below that recorded by Atacadão, which has a margin of 7% to 8%. Big hypermarkets have a margin of 4% to 6%, lower when compared to Atacadão, Carrefour hypermarket (6% to 7%) and Sam’s Club (10% to 11%).

The numbers, according to the finance director of Carrefour Brasil, David Murciano, are “margins at the store level” already seen today and do not consider costs of the business units as a whole.

The executives explained that the choice of conversions took into account factors such as geography and purchasing power in each location.

Maquaire said that part of the Big hypermarkets was already being transformed into wholesale by the former controllers of Big, so the number of conversions from Big to Carrefour hypermarkets is higher than for Atacadão (47 to 28), although he highlights the importance of the format of wider scope. “We think it’s very important to have hypermarkets,” he said, noting, for example, the role of these stores in terms of distribution for e-commerce.

SAM’S CLUB and HIPERCARD

Sam’s Club should be a new focus for the group’s growth, according to Murciano. The format, a shopping club with the presence of imported products and in which only members can consume, is seen, together with the group’s financial services, as a growth accelerator in addition to the synergies already calculated.

Maquaire said the contract with Walmart over the rights to Sam’s Club expires in 2026 and that the group is already negotiating a renewal. The format has been facing cooling margins due to the effects of the dollar on imports, but the company expects normalization in the medium and long term.

Carrefour maintained its expectation of earnings of around R$ 2 billion in Ebitda (earnings before taxes, interest, depreciation and amortization) per year until 2025 with the acquisition of Big. In addition to the expenses and investments for conversion, the company reported a negative impact of R$ 300 million on Ebitda due to extraordinary expenses between 2022 and 2023.

Regarding financial operations, “it is natural” that Carrefour Brasil talks to Itaú Unibanco about Hipercard, said Murciano, when asked about the possibility of incorporating the finance company into Banco Carrefour.

Hipercard belongs to Itaú Unibanco, which also holds a stake in Banco Carrefour.

Despite Carrefour Brasil’s focus on the integration of BIG, expected to last 18 months, the group continues to evaluate mergers and acquisitions possibilities, said the executives.