July 10, 2019 / 9:52 PM / 2 months ago

Brazil retailer Via Varejo shares soar following change of control

SAO PAULO (Reuters) - Shares in Brazilian electronics retailer Via Varejo (VVAR3.SA) have soared more than 30% this month with investors betting on the industry experience of the Klein family, which recently re-acquired control of the company.

Michael Klein and his family boosted their stake in Via Varejo to 27% last month in an auction, resulting in Klein, whose father had founded appliance retailer brand Casas Bahias in the 1950s, being elected as chairman of the board.

The family sold its ownership of that company to retailer GPA SA (PCAR4.SA) in 2009 and it became part of Via Varejo. GPA had struggled to find a buyer for the money-losing company for two years.

Via Varejo shares closed at 6.73 reais on Wednesday, down 0.3% but still up 35% since Klein was elected chairman on June 26. The shares have also gained a third over the last month, making them the top gainers on Brazil’s Bovespa index.

“What is happening is a result of Klein,” said fund manager André Lion at Ibiuna Investimentos, a Via Varejo shareholder.

“With the changes he is making, the appointment of people who know the retail sector and are completely dedicated to the company, it is reasonable to predict the company will improve a lot.”

Last week, Joao Luiz Braga, a partner at XP Asset Management, Brazil’s largest retail brokerage, told a crowd of 8,000 investors, managers and clients that Via Varejo was the largest position in most of its funds, while acknowledging risks related to the execution of the turnaround.

Some investors also said they expected Brazilian interest rate cuts to help spur consumer demand and benefit Via Varejo and other retailers. The central bank’s weekly FOCUS survey of economists is predicting the benchmark Selic interest rate to be cut from 6.5% currently to 5.5% by the end of the year.

But fund manager Werner Roger, founding partner of Trigono Capital, said he saw no fundamental changes despite Via Varejo’s hiring of a high-profile executive from online retailer Magazine Luiza SA (MGLU3.SA).

In a note, analysts at investment bank BTG Pactual acknowledged the experience of incoming executives but cited risks and competition in the sector.

“Considering the risks of execution, we prefer to stay out of the way when it comes to Via Varejo, maintaining our ‘neutral’ rating until we see clearer signs of the operation recovering,” the note said.

Reporting by Paula Laier; Writing by Jake Spring; Editing by Richard Chang

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