Brazilian Retail News

Year 10 - Issue # 388 - São Paulo, May, 23th, 2011

Phone: (5511) 3405-6666

São Paulo bans plastic bags

São Paulo City Hall passed a law banning the use of plastic bags in any store in the city. Also approved by the mayor
Gilberto Kassab, the rule will be valid from January, 2012, on. São Paulo is the country’s second capital city to approve
such measure, after Belo Horizonte, in Minas Gerais state.

Online retail sales up 22% on Mother’s Day

Online retail sales reached R$ 760 million (US$ 469.13 million) in the Mother’s Day season, 22% more than in 2010,
according to data released by e-Bit consulting. Average ticket topped R$ 350 (US$ 216.05). Health, beauty, cosmetics and
medicine was the top-selling category, with 14% of total orders, followed by home appliances (13%) and computing (11%).

McDonald’s is the strongest brand in Brazil

Fast food chain McDonald’s was considered the strongest
brand in Brazil, according to a BrandAnalytics/Millward
Brown research that evaluated consumers’ brand loyalty
level. This is the first time McD reaches the top spot, climbing
one position over last year. Coca-Cola and Porto Seguro
followed, with Petrobras and Omo completing the top 5.

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Brazilian Retail News
Year 10 - Issue # 388 - São Paulo, May, 23th, 2011
Phone: (5511) 3405-6666

Pão de Açúcar profit drops 34.9%

Grupo Pão de Açúcar, Brazil’s top retailer, said its net
profit fell 34.9% in Q1 over the same period last year, to R$
110.8 million (US$ 68.39 million). The company said the
drop was due to reoccurring expenses from its merger with
electronics retailer Casas Bahia, adjustments to the new
accounting standard (IFRS) and non-reocurring expenses
with Globex restructuring. Excluding these effect, profit fell
11.2% year-on-year, even with a 55.9% jump in net sales,
to R$ 10.86 billion (US$ 6.7 billion). Excluding Casas Bahia,
net sales rose 11.9% (6.8% in same-store sales), to R$ 7.8
billion (US$ 4.81 billion).

DIY sales drop 1.41% in April

The building supplies industry said its sales fell 1.41% in April over the same period last year, according to the industry
group Abramat, who said the drop was due to the government’s credit restrain measures. This was the second consecutive
month sales fell, after 16 months of growth. For 2011, however, the group has kept its sales growth forecast of 7%, below
the 12.14% reported last year.

Casas Bahia to float in late 2012

Today, the top concern for Pão de Açúcar and Casas
Bahia is to merge the two companies. But plans are already
in place: the company intends to do a public offer of Nova
Globex (the group’s electronics branch, comprised by Casas
Bahia and Ponto Frio chains) in the second half of 2012.

Magazine Luiza Q1 profit rise 31.7%

Magazine Luiza, Brazil’s third-largest electronics retailer,
said in Q1 its net profit rose 31.7% year-on-year, to R$
12.3 million (US$ 7.59 million). The figure was driven by
a 50.5% rise in net sales, to R$ 1.41 billion (US$ 870.37
million). Same-store sales rose 25.6%, boosted by a 58.2%
expansion in internet sales.

Brazilian Retail News 2 23/05/2011

Brazilian Retail News
Year 10 - Issue # 388 - São Paulo, May, 23th, 2011
Phone: (5511) 3405-6666

Momentum
Strategic blackout
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

Brazil is not ready for the economic activity it has been experiencing today. And it all points to the fact the scenario will be even
worse. Regarding traffic, airports, lack of specialized workforce, roads, ports and in all other infrastructure issues. And what we’ve
been noticing daily is a long, slow, complex and almost inconsequential process on how structural issues have been addressed.
A complete blackout in the understanding of the dimension of the changes the country has been living.
It all would be dramatic alone, but forecasts point to a deeper worsening in the next years, due to the soccer World Cup in 2014
and the Olympic Games in 2016. These issues have been managed in an almost reckless way and there are some remembering
other countries have, in the past, refused to host the World Cup, due to domestic problems.
Long lines, lack of comfort, lack of services, high costs, prices beyond common sense and a constant frustration are already
a part of the daily life and have been softening the most critical spirit. In the current scenario, the most critical ones have been
frustrated with the feeling things are just this way and will continue to be like this. And, more than a strategic blackout, we’re
living on a lack of citizenship.
Brazil has become one of the world’s most expressive economies and can rise even more in the ranking of the most mature
countries. Its infrastructure, however, is not ready to support it, and there is a deep disdain about present and future consequences
of this scenario. The worst is the measures that could minimize these consequences have been adopted in a costly dribs-and-
drabs way, not letting the country fully experience these structural changes.
And the cost of this lack of a strong approach to fulfill the need of a deep transformation goes to the cost of products, services,
workforce, transportation and logistics, being considered as an inevitable cost that lets the country away from a more competitive
environment, as anything made in Brazil becomes more expensive.
The drama goes from the airport conditions to the chaos of the largest cities’ traffic, that today can jam anytime. But it also
goes to the inhuman conditions of public health to the low level of the public education system. One must also mention the
critical state of most government-managed roads, the heavy port taxes, the energy blackouts, the lack of hotel rooms and the
saturated highways. And the World Cup is still three years ahead.
In this deadline, cities in China, Qatar, Australia, Japan or India could perform major structural changes, but in the Brazilian
reality, it is not feasible, due to the bureaucracy that halts the necessary changes. And, definitely, the issue here is not money:
it is more a matter of vision, determination, projects, planning and processes.
The bad example of the Pan American Games in Rio de Janeiro is a huge warning. The starting budget was irrationally overdue,
as planning lacked, and what was made is falling down or can’t be used anymore. And the World Cup and the Olympic Games
may leverage this effect. As with everything in life, many lose and a few win in this perverse reality.
Without these two huge events the scenario would already be dramatic, exposing the population to the consequences of this
chaos the country has been experiencing. And is surprising how passively the issues arising from this situation have been
treated, as if there were no deadlines to reach and a daily scenario of growing problems.
The worst could happen seems to be in shape: passive population and leaders, not raging against it all and not demanding a
change of behavior to rescue a minimum of common sense when dealing with public issues. One can’t accept that, paying the
overwhelming taxes Brazilians pay, the population continues exposed to all this.
There are people lacking vision, but there can’t be a lack of indignation.

Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouvêa de Souza with the most important news
on the Brazilian retailing. The content can be freely used, once the source is quoted. If you want any information on BRN or our
services, please send an email to publicacoes@gsmd.com.br or access GS&MD - Gouvêa de Souza at www.gsmd.com.br.

Gouvêa de Souza & MD Desenvolvimento Empresarial Ltda.

Av. Paulista, 171 - 10º floor
Paraíso – São Paulo – Brazil – Zip Code: 01311-904
Phone: (5511) 3405-6666 – Fax: (5511) 3263-0066

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