Magazine Luiza's Strategic Pivot: Amazon Partnership and Financial Services Take Center Stage

The New Strategic Cycle

Magazine Luiza's second-quarter 2026 earnings call marked a definitive shift in strategy. CEO Fred Trajano opened by framing the period as the start of a new cycle built on two pillars: consolidating AI-driven omnichannel leadership and accelerating services monetization. The results were mixed on the surface—revenue fell 2% year-on-year to BRL 11 billion, and the company posted a net loss of BRL 50 million—but the narrative is clearly about a long-term transformation rather than quarterly fireworks.

The most striking move is the Amazon partnership, which Trajano described in detail: "So we decided to introduce these 1P products into third-party platforms... we announced an important partnership with Amazon in Brazil." The logic is straightforward: Magalu is already the largest 1P operator in Brazil across categories like electronics and sports, but it was only reaching its own ~50 million monthly visitors. By listing products on third-party marketplaces, including Amazon and AliExpress, Magalu aims to resume online growth without sacrificing profitability. Trajano emphasized the financial guardrails: "We want to resume online growth, but we will only do that if we have a contribution margin, if it makes sense for the business."

This represents a notable departure from prior calls, where management primarily discussed internal conversion improvements and fulfillment penetration. In the May 2025 call, the focus was on "conversion rate" and "service level," but the current call showcases a more open ecosystem approach. Even the Magalu Cloud and MagaluPay platforms are now being positioned as external service engines, not just internal enablers.

Physical Stores vs. Online: A Deliberate Trade-Off

The company's physical store performance was a bright spot, with 9.7% same-store sales growth, boosted by the World Cup but also broad-based across categories. Trajano noted, "We grew 39% in physical stores in the television segment, but we made it a point to show you that it was not only TV sets that increased. White goods grew 15%... even furniture grew 10%." This is part of a deliberate strategy: "It's important to grow in physical stores because that's the channel where we can achieve better profitability."

Meanwhile, online sales remained flat, with management explicitly accepting market share loss in categories affected by global memory price increases. "We maintained our discipline and our focus in growing with profitability," Trajano said. This is a continuation of the profitability-first mindset seen in previous quarters, but the Amazon partnership and the upcoming launch of Lu's WhatsApp as an agentic commerce channel are the new arsenal for reversing the online slump.

"At Amazon, sales have surprised us in the beginning... The main highlight here is on the white line as we expected a heavy items that we operate very well... We are very happy about this partnership," said Fabrício Garcia, executive leader of verticals.

Financial Services: The Hidden Profit Engine

The call reinforced that financial company migration is progressing well. The new financial institution (IF) originated 100% of new CDC (buy-now-pay-later) loans in the quarter and posted a net income of BRL 17 million. CFO Roberto Rodrigues noted that the portfolio is being gradually shifted from retail to the financial branch, which should improve transparency and tax efficiency. Jorg Friedemann, head of MagaluPay, explained the structural advantages: "We have a tax improvement close to 20% in addition to having the funding of third-party resources and operating at a higher leverage."

Expense control also remained a key theme. Trajano stated, "We have frozen new hires since the beginning of the year... Total expense at Magalu represent more than BRL 10 billion per year, so there's a lot of opportunity." In the Q&A, he doubled down: "Expenses do not depend on the macro scenario. It depends on our discipline and our determination."

What Changed and Why It Matters

The company's strategic pivot is substantial. Previously, management emphasized internal conversion and fulfillment as the path to profitability. Now, they are openly courting external platforms like Amazon to regain online momentum, while simultaneously investing in proprietary AI commerce (Lu's WhatsApp) and cloud services. The Galeria Magalu physical format is also being replicated, further solidifying the physical store renaissance.

This is a name-in-motion story with strong evidence. The Amazon partnership and the migration of credit operations into a regulated financial company could be long-term value creators, but they also bring execution risk and macro sensitivity (interest rates, memory prices, Amazon's own strategy). The market cap of ~BRL 5.2 billion suggests significant upside if the strategy pays off, but the near-term earnings loss and stalled online sales keep the risk high.