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Citi cautious on Brazilian retail sector

  • Initiating cautious coverage on 8 Brazilian retail sector names (7 Holds, 1 Sell), Citigroup says multiples look expensive considering macroeconomic headwinds - among them rising inflation and interest rates coupled with a high level of consumer indebtedness.
  • "Slower demand presents top-line risks for Brazilian retailers exposed to the mid- and lower-income segments. Moreover, inflation could push operating expenses up while rising interest rates pressure financial costs for leveraged companies."
  • The central bank hiked the Selic for the 5th straight meeting last month and gave no indication it's going to break the string in November.Brazil ETFs: EWZ, BRF, BZF, BRXX, EWZS, BRAQ, BRAZ, BZQ, BRAF, UBR, BRZU, FBZ, BRZS, DBBR
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