CIELO S A : Notice to the Market - Retail grows 4.6% in July, according to ICVA

Brazilian retail grows 4.6% in July, according to ICVA

Russian World Cup and calendar effect helped increase the sales compared to July last

year

In July, Brazilian retail sales grew 4.6% YoY, excluding inflation, according to Cielo Broad Retail Index (ICVA). In nominal terms, mirroring the sales revenue observed by the retailer, Cielo Broad Retail Index grew by 7.6%.

The month's result was strongly benefited year-on-year. In 2018, there were two matches of the Brazilian team at the World Cup, which pushed consumption down on those dates. July this year also had one more Wednesday and one less Sunday, a weaker day for retail. Adjusting the Cielo Broad Retail Index ex-inflation for this non-recurring effect, the increase would be of 2.1%. Nominal Cielo Broad Retail Index, in turn, would rise 4.9%.

"The calendar effect was key to sales growth in July 2019 compared to July 2018. If it were not for that, retail would be stable. A positive for consumers was the decrease in prices over the last two months, which slightly helped accelerate sales. However, shopkeepers could not celebrate this, since lower prices led to lower revenues. For them, as we have pointed out in previous reports, the 2018 sales upward path has slowed down in 2019 so far," says Gabriel Mariotto, Intelligence Officer at Cielo.

INFLATION

The Broad Consumer Price Index (IPCA) calculated in July by IBGE grew by 3.22% LTM, slowing down from the figure registered in June (3.37%). The Food and Transportation groups helped slowdown the index.

Weighing the IPCA by Cielo Broad Retail Index's segments and weights, expanded retail inflation in July stood at 2.8%, a decrease from June (3.4%).

SEGMENTS

Deducting the inflation, all blocks included in Cielo Broad Retail Index grew in July 2019 vs. July 2018. In the Non-Durable Goods group, Drugstore/Pharmacy segment pulled the result up, while Veterinary and Pet Stores segments pulled the index down.

In the durable and semi-durable goods block, Clothing and Sporting Goods segment should be highlighted, contributing positively to the result. "The weather seasonality doesn't change much from year to year, but June was colder last year, and this led people to anticipate purchases. This year the cold weather arrived later, and consumers made purchases in July." The Optics and Jewelry segment was the one that contributed negatively to the result.

In the Services group, growth was driven by Tourism & Transportation and Automotive segments, while Aesthetics and Hairdressers pulled the index down.

REGIONS

The Brazilian Southeast, South and Midwest regions slowed down in the month, according to ex-inflation Cielo Broad Retail Index with calendar adjustment. The North and Northeast regions accelerated.

Regarding ex-inflation Cielo Broad Retail Index without calendar adjustments, broad retail sales in the North increased 7.3% YoY, followed by the South and Midwest regions, with 7.2% and 5.0% YoY, respectively. The Northeast region grew by 4.5%. The Southeast region grew by 3.0%.

Regarding the nominal Cielo Broad Retail Index - which does not deduct the inflation -, the highlights were the North and South regions, growing 10.0% and 9.9%, respectively. Midwest and Northeast grew by 7.8% and 7.2% in July. The Southeast grew by 6.9%.

ABOUT CIELO BROAD RETAIL INDEX

Cielo Broad Retail Index (ICVA) monitors monthly the evolution of Brazilian retail, according to sales in 18 segments mapped by Cielo, from small retailers to large retailers, accounting for 1.4 million company-accredited retailers. The weight of each segment in the index's overall result is defined by its monthly performance.