Big chains renegotiate store rents
Large retail chains including Lojas Renner, C&A, Marisa, Via Varejo and Magazine Luiza are using their bargaining power to wrest rent reductions for their hundreds of street and mall stores. Some have managed to advance in the negotiations, others are adopting a tough stance. Via Varejo, for example, initially suspended payments to owners of the thousand-plus facilities that host its stores and distribution centers, to their surprise.
Some companies, including Via Varejo, which owns chains Casas Bahia and Ponto Frio, and Marisa, are renegotiating payment terms with their own controlling shareholders, which many times end up being their biggest landlords. Michael Klein, the largest shareholder in Via Varejo, rents 300 facilities to Via Varejo, between stores and warehouses, and the Goldfarb family, founder and largest shareholder of Marisa, rents some dozens locations to the fashion chain.
In the beginning of April, Via Varejo sent a letter to owners of almost 1,100 stores of its two chains informing the suspension of rent payment for March, due in April. It also informed that it doesn't have yet a forecast for regularization of payment.
"We contacted the company and tried to negotiate, but their lawyer said it was a general decision. They don't speak of paying in installments or postponing, only say they will not pay. Since is a lease for several members of the family, we can't be without this money," says Alessandra Hilário, daughter of one of the owners of a facility in São José dos Campos, São Paulo.
Another landlord with four stores in São Paulo says he was informed in the beginning of the month of the freeze of the next payments and that this is the effect of zero sales at physical stores over the last few weeks. About 70% of this company's revenue comes from the stores, now closed.
The decision of initially suspending rent payments was taken weeks after the company told analysts in March that it had a solid cash position to cope with the crisis (R$4.4 billion). One source says the suspension is part of the negotiation, that the company is open to advance the talks and has a solid cash position. The source also says the company has been able to migrate a larger part than expected of the stores' sales to the website.
Via Varejo had already mentioned the issue in an earnings conference call in March. "About rents, obviously, with the stores closed, we will indeed take action regarding the amounts paid. There are already several malls...
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