C&A Brasil 2Q26 – Conference Call Highlights

Research evidence excerpt

J P M O R G A N

Latin America Equity Research

05 August 2026

C&A Brasil

2Q26 – Conference Call Highlights

Overweight

CEAB3.SA, CEAB3 BZ

Price (04 Aug 26):R$9.72

LatAm Retail & Healthcare

C&A (CEAB, OW-rated) just hosted its 2Q26 call with top management. See the

main highlights below.

World Cup and consumer traffic. Management team flagged that the World

Cup negatively impacted 2Q and early 3Q sales. Nonetheless, the company is

positive with a rebound in traffic entering 2H.

Margins. 2H margin levels should not be impacted by higher market

markdown levels. Dynamic pricing should continue to drive gross margin

resiliency.

Capital allocation. The company is not willing to increase gross debt amount

under the current interest rate scenario. As the company generates cash, the

management team is eyeing shareholder return options (e.g. buybacks).

2H pricing and competition. Pricing strategy is derived from the value

proposition, as the absolute price is not comparable to those of competitors that

operate with lower product quality.

2H expense dilution. The company has room to cut expenses and increase

efficiency; therefore, the company expects 2H26 to have similar to better

expense dilution than in 2Q25. Bear in mind that the improvements should be

concentrated towards 4Q, as the company will have extraordinary marketing

expenses regarding festivals and anniversary.

Working capital. Inventory days were affected by (1) the discontinuation of

cellphones, which normally carry lower inventory days and was responsible

for half of the increase; (2) abnormally lower inventories at the end of 2Q25;

(3) sales below expectations during June because of the World Cup effect; and

(4) the acceleration of the store expansion. The base will be clear of cellphones

in 3Q, while inventories should normalize to 2025 levels throughout 2H26.

CEAB doesn’t expect negative impacts on gross margin coming from the

normalization of inventory.

Online sales. The penetration of 8% still has room to increase while

maintaining profitablity. The company also sees C&A Pay as an opportunity

to engage consumers with a broader retail portfolio while increasing

expenditure and increasing.

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