In Brazil, interest rates are high, defaults are rising, the consumer is under pressure. One company is set to benefit from this environment.
I always stayed away from Nubank and Inter & Co, due to high interest rates and a consumer credit under more and more pressure in Brazil. I could not get comfortable with that.
I could get comfortable with a much more defensive business model, at cheaper valuations:
Sendas distribuidora is a retailer in Brazil. It is only available on the OTC market and in the Brazilian stock exchange.
Market cap: 13 billion BRL.
This company represents a very interesting set up to invest in a forever defensive asset at low valuations.
But first, a clarification. The company name is Sendas Distribuidora, while the business is called Assai Atacadista. This is a bit confusing. For clarification, I will use the name “Sendas” everywhere in the article.
History
The company was started with one store in Sao Paulo as a wholesaler for retailers in 1974. The name Assai comes from the Japanese Asahi · Rising sun.
Fast forward to 2007, where the company has only 15 stores. GPA took control of 60% of Sendas. GPA was itself controlled by the French Casino group, a company that was a major french retailer and is now insolvent.
GPA allowed for growth and entry into the consumer retail segment.
2008 - 28 stores
2010 - 57 stores
2011 -58 stores and fully owned by GPA
2017 - 127 stores and launch of the Passai card.
2017 - 166 stores
2021 - 212 stores - Spin off from GPA, and the purchase of Extra Hiper stores is announced, which will be converted into Assaí, through a transaction worth R$4.2 billion.
2022 - 263 stores
2023 - 288 stores
2025 - 312 stores, 10 new during the year.
2026 - Sale of financial services firm FIC
We can see that there was an acceleration in number of stores post 2021 followed by a slowdown post 2023. This is not an accident.
This is because of high debt and an increase in the Brazilian central bank interest rate and the end of cheap credit.
Here we are in 2026, with 313 stores and a relatively high leverage ratio.
The company managed fast revenue growth since 2019.
Business overview
Sendas owns and exploits 313 stores in Brazil.
It is “a Brazilian wholesale company that serves small and medium-sized businesses and consumers looking for savings, product variety, and good customer service.”
The stores look like the first picture of my article above. Sendas offers low prices by focusing on the large volume model.
They mostly don’t use distributors but deal directly with the food and products producers. The pallets with high ceiling model allows for cheaper storage and low in store labor costs.
58% of sales are B2C and 42% B2B (Food service and resellers). B2B sellers mean that they also move inventory faster compared to a traditional supermarket.
All these points together, the classic cash and carry model, allows for Sendas to offer cheaper prices due to cheaper operating costs.
Most of the stores are in the Sao Paulo and southeast area, with a population of over 50 million people. This is closely matching the GDP and population map of Brazil, with maybe some absence in the Southern and western part of Brazil. There remains room for a lot of expansion.
High leverage: the curse and the opportunity
..