May 22, 2020 / 7:10 PM / 4 days ago

UPDATE 1-Brazil's Lojas Renner sees margin under pressure in Q2 amid slow store reopening

(Adds first-quarter numbers, analysts' comments and share price)

By Gabriela Mello

SAO PAULO, May 22 (Reuters) - Brazilian fashion retailer Lojas Renner SA still sees margins under pressure in the second quarter even though sales have been improving since early April as the company slowly reopens its brick-and-mortar stores, executives said on Friday.

"As of April we've seen sales accelerating in reopened stores, but 80% of them are still closed and this should weigh on margin," Chief Executive Fabio Faccio told analysts and investors in a call on quarterly earnings.

By May 21, Lojas Renner resumed activities in 109 of its 597 brick-and-mortar stores in Brazil, Argentina and Uruguay.

Shares in Lojas Renner were down more than 7% in the afternoon at 37.75 reais after hitting a session low of 37.36 reais, among the biggest decliners in Brazil's benchmark index Ibovespa.

On Thursday night, Brazil's largest fast-fashion retailer reported net income plummeted 94% in the first quarter from a year ago, as the COVID-19 pandemic slammed sales and led the company to raise delinquency provisions.

Analysts at Credit Suisse said the coronavirus crisis played a "painful role" in Lojas Renner's quarterly numbers, highlighting a 10.7% drop in same-store sales and a 175% rise in credit losses.

"Lojas Renner's performance is likely to be marred for as long as the pandemic landscape persists," they wrote in a report, adding 93% of the company' stores are located in malls and consumer's willingness to purchase discretionary goods tends to be lower in coming months. (Reporting by Gabriela Mello, Editing by Franklin Paul and David Gregorio)

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