Riots Scaring Away Shoppers Cost Stores 1 Billion Reais

Protests sweeping across Brazil are scaring off shoppers and prompting malls to shut early, eroding sales at companies from Magazine Luiza SA to Marisa Lojas SA.

Retailers have lost an estimated 1 billion reais ($446 million) in sales in the two weeks since protests began, said Daniel Pla, a professor of commerce at Fundacao Getulio Vargas in Rio de Janeiro, who based his calculations on an analysis of sales at Rio stores and malls. Magazine Luiza and Marisa Lojas’s stores in downtown Sao Paulo were vandalized and looted last week, while mall operator Multiplan Empreendimentos Imobiliarios SA shut at least two of its Rio shopping centers early on June 21 amid concern the same would happen there.

The protests, which have left at least two people dead, are compounding a retail-sales slowdown fueled by disappointing growth and skyrocketing prices for food, transportation and housing. A government report showed last week that inflation through mid-June quickened to 6.67 percent, above the central bank’s target range and the fastest pace since November 2011.

“Stores are closing earlier, people are staying home,” Pla said in a telephone interview from Rio de Janeiro. “It’s affecting consumer behavior.”

Consumer confidence has been sliding since June 2012 and this month reached the lowest since March 2010, according to figures released by Fundacao Getulio Vargas this morning.

Magazine Luiza fell 3.7 percent to 6.01 reais at 5:05 p.m. in Sao Paulo trading, while Marisa Lojas fell 2.7 percent to

22.28 reais.

Catch-All Protests

Protests have swelled to more than 1 million people and spread from Rio, Sao Paulo and the capital Brasilia to cities across the country. The demonstrations were sparked by an increase in bus fares and later morphed into a catch-all for discontent over corruption, violence and spending on stadiums for the World Cup soccer championship in 2014 and the Olympic Games two years later.

President Dilma Rousseff condemned violence by a minority of demonstrators, saying in a June 21 televised address that it “embarrasses” Brazil.

“If we let violence take us off our path, we will not only be wasting a big historic opportunity, but also running the risk of losing a lot,” she said.

Police restrained protesters who threatened to disrupt a Confederations Cup soccer match in which Mexico’s national team beat Japan in Belo Horizonte on June 22. More than 100,000 marched across Brazil during the weekend.

Vivo Store

On Avenida Presidente Vargas in downtown Rio, the epicenter of a 300,000-strong protest on June 20, an outlet for Telefonica Brasil SA’s wireless operator Vivo was closed with its security doors bent and mangled. Down the block, a Banco Santander Brasil SA branch was taped off after protesters broke windows and smashed cash machines.

“This movement has caused sales to fall,” said Joao Almeida, the owner of a newspaper stand down the street from a damaged Itau Unibanco Holding SA office. “I agree with the protests but not the vandalism. It’s not right to destroy things that belong to others.”

Multiplan, Brazil’s largest mall operator, closed its high-end Village Mall, where Apple Inc. has its first store in Brazil, and the nearby BarraShopping center closed at 2 p.m. on Friday, one of the busiest shopping days of the week. Clothing retailer Cia. Hering and Ponto Frio, the appliance and electronics chain owned by Cia. Brasileira de Distribuicao Grupo Pao de Acucar, have stores at BarraShopping. A press official for an outside public-relations agency, In Press Porter Novelli, said the move was a preventative security measure.

Boosting Security

BR Malls Participacoes SA is also increasing security.

The company expects “some impact while people are protesting,” Ruy Kameyama, the company’s director of operations, said in a telephone interview from Rio de Janeiro. “But the losses will be diluted in the month of June.”

A press official for Magazine Luiza said the company is cooperating with the investigation into vandalism at its store and declined to comment further. A press official from outside press agency, Imagem Corporativa, said the Marisa store that was looted had reopened and declined to comment further. A press official for Pao de Acucar did not return phone and e-mail requests for comment. Hering and Telefonica Brasil press officials declined to comment.

Second-quarter results are likely to suffer as shoppers stay home to avoid the protests, said Daniel Snowden, an emerging markets analyst at Informa Global Markets.

“Economic activity figures this month are going to be pretty terrible,” he said in a telephone interview from London.

Jump in Sale

Not everyone is losing out in the midst of the protest movements. APL Equipamentos de Seguranca, a store in Sao Paulo that sells safety equipment, has seen sales jump, said Andre Luiz Braschi, the manager of the store.

“We’ve seen an increase in gas-mask sales,” he said by telephone. “It’s definitely more than twice of what we’re used to selling.”

Stores overall should experience a drop in traffic, said Renato Prado, an analyst at Fator Corretora in Sao Paulo.

“Consumer confidence is very important,” he said by e-mail. Once protests end, “we may see a downturn in sales due to a change in consumption patterns, or sales could even quicken as a result of consumers having put off shopping.”