Brazil's Americanas shares plunge 77% after accounting 'inconsistencies' found

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By Gabriel Araujo, Paula Laier and Alberto Alerigi

SAO PAULO (Reuters) -Shares in Brazilian retailer Americanas SA plummeted more than 75% on Thursday after its chief executive resigned citing the discovery of "accounting inconsistencies" totaling 20 billion reais ($3.9 billion).

Outgoing CEO Sergio Rial, who replaced Miguel Gutierrez less than two weeks ago, said in a conference call with investors he had "clearly found some very important distortions" and signs of a lack of transparency from the previous management.

Americanas shares fell as much as 90% in pre-market trade while their opening was delayed on the exchange for several hours, before closing down 77.33% at 2.72 reais. The decline wiped out 8.4 billion reais in market value.

Chief Financial Officer Andre Covre, who had just joined Americanas as well, also left the firm long controlled by three Brazilian billionaires who founded 3G Capital.

Rial, the former head of Banco Santander (BME:SAN)'s Brazilian arm, attributed the inconsistencies to differences in accounting for the financial cost of bank loans and debt with suppliers.

Americanas' stores are ubiquitous at Brazilian shopping malls. The company's e-commerce unit, which traded as a separate company before a recent restructuring, is one of the country's top online retailers.

The outgoing CEO said Americanas would likely need a capital increase, though he noted he didn't expect a short-term impact from the inconsistencies on its cash position.

PwC, Americanas' auditor, declined to comment on the accounting inconsistencies referred to by Rial.

Several analysts put their recommendations on the firm under review, while Brazil's securities regulator CVM said it had started two probes into the retailer to investigate the issues.

Separately, Americanas said an independent committee was being formed to investigate the matter that would include former CVM director Otavio Yazbek.

'UNUSUAL CYCLE'

One fund manager said Americanas' numbers had raised questions.

James Gulbrandsen, NCH Capital's chief investment officer in Latin America, said his financial models showed Americanas facing issues, with the company posting an unusual cycle for a Brazilian retailer.

"Americanas was in a normal deceleration pace in mid-2021 and then out of nowhere it started to reaccelerate, as if it had a new business model, as if it was a biotech company," he said in an interview with Reuters. "Time passed and in the third quarter of 2022 it went drastically back to a slowdown."

"That was something we had never seen with retail companies, which tend to be very predictable in terms of economic cycles, so we detected some irregularities," Gulbrandsen said.

Americanas in a securities filing late on Wednesday that it believed the cash impact of the inconsistencies was not material, although internal inquiries and work by independent auditors was needed to determine their impact on its financial statements.

"Even after the meeting with the company to clarify points mentioned in the filing we still do not have enough visibility to detail the financial impact the revisions should have on the company's figures," analysts at XP (NASDAQ:XP) Investimentos said, referring to the conference call with the company's departing CEO.

"The call with Rial confused more than it helped," said a Brazilian fund manager who spoke on condition of anonymity. "It provided a clue but it's still hard to understand how deep this hole is. We'll need more time and information."

Analysts at Santander and JPMorgan (NYSE:JPM), who previously rated Americanas "neutral" and "underweight" respectively, also forecast a major negative reaction to the news.

"In sum, we see the company's cash flow situation, which was the reason why we recently downgraded the stock to UW, as much more delicate than anticipated," JPMorgan said.

($1 = 5.1600 reais)