Renta 4| According to a Relevant Fact issued in the Spanish National Securities Market Commission (CNMV) and a letter from its CEO, Martín Tolcachir, DIA has announced the closure of 343 of its 590 shops in Brazil, in addition to three warehouses. The Company takes the decision as part of the strategic review of the business in the country, already announced at its results conference on 29 February, and as a result of the persistent negative results, which in 2023 saw sales fall by 12.4% like-for-like and 18.2% in net sales, with an adjusted EBITDA of €-55 million and an EBITDA margin of -7.6%, losses of €154 million ( €-40 million in 2021 and €-72 million in 2022) and an asset impairment of €60 million. In addition, the Company will continue to analyse the different strategic alternatives for the rest of the business in Brazil.
For the time being, they will focus their activity on the São Paulo area, where the business is more profitable and the concentration of shops allows them to capitalise on the logistics network and reduce costs, operating a portfolio of 244 shops.
Assessment: Positive news that will allow the Company to allocate resources and focus on the most profitable markets with the greatest growth potential, Spain and Argentina, where it has a good competitive position and a clear strategy focused on local distribution, leaving behind a very competitive market in which it had a precarious position and no defined strategy.
The Company could opt for the sale of the Brazilian business provided it receives interesting offers. Our valuation of the business is around €200m (27% market cap and ∼12% of our valuation of the Company), applying a multiple of 0.22x average sales 2024-2026, so we will revise it downwards once we know the details of the closure of the shops and the Company’s strategy.
