Exclusive: Transformation of Casas Bahia is almost half, says CEO

Two years ago, Renato Franklin was surprised by an invitation to become CEO of the Casas Bahia group (Bahi3). It was a great honor – and one of the greatest challenges of his professional life.

One of the best known brands in Brazil, in retail and outside it, Casas Bahia was facing high debt and burned cash in a series of operations that escaped what the company could do best: “which is selling furniture, appliances, mobile, television. We are leaders, we have scale and we know how to make money, especially with credit and physical store,” said Franklin, this week’s guest of this week Infoomoney Interview.

Like other companies, Casas Bahia tried to do “everything” in the postpandy-to be fintechhave a marketplace Generalist, sell typical supermarket items. But with the winds of macroeconomics blowing to higher interest rates, Franklin’s mission – which came from nine years in the moved (), preceded by ten in the vale () mining company – became a focus on the allocation discipline, choosing where to shoot from the effective return of each invested real.

Some balance sheets and the company has found a breath in cash flow – but still needs to gain operational efficiency and improve capital structure. “We are almost half of the transformation, which runs until the end of the year,” said Franklin. It remains to reduce the debt to half and be profitable again – to again grow.

See the full interview in the player above or check out the main excerpts below:

Infoomoney – You just turned two as CEO of Casas Bahia. What balance does this period do?

Renato Franklin – I’m happy with the trend, but we don’t end yet. We are almost half of the transformation, which runs until the end of this year.

It is an honor to work in a company with such a strong brand, a different logistics infrastructure, the famous “meatzinho” that every Brazilian knows and is super profitable, with a lot of growth potential. But in the postpandy the company was trying to do everything.

With the change of macroeconomic context, the high interest rates and the company’s capital structure very leveraged, it was difficult to build all these businesses at the same time. Our strategy was to bring capital allocation discipline. Looking where we make money and evaluate the company’s competitive advantages, we decided to focus on what we know how to do: sell furniture, appliances, mobile, television. This is where we are market leaders, we have scale and we know how to make money, especially with the credit and the physical store. E-commerce is important to the scale, but the physical store brings profitability.

Infoomoney – It was a sector change to you, who passed through Vale and came from the moved. Was it a shock?

Franklin – In car rental, there is a little service retail, there were almost 300 stores, but it is obviously very different from buying and selling goods every day, on a scale like the Casas Bahia group.

The legal was bringing the legacy of the capital allocation discipline of the business car rental, which is very financial. You look at the return of each rental contract on the cost of capital and try to maximize.

Retail comes a lot on the scale, trying to grow. So I saw the opportunity to bring more discipline of allocation, to calculate the return on the cost of capital in each real.

Infoomoney – And how?

Franklin – The first thing was to look where it had money stopped without generating value. And I had a lot of money in stock. There were products there for over 180 days, so you have to promote. This hurts the margin at first, but you adjust and make a box.

Second, since we no longer wanted to do everything for everyone, how do I adjust the structure? We made a change in the organizational structure, with a reduction of almost 50% of leadership positions, for the company to be agile and lean.

Infomoney – His first anniversary in office was marked by the restructuring of a R $ 4 billion debt from Casas Bahia in April last year. How did this evolve here?

Franklin – From the beginning, we talked to the banks about passing tranquility to the market. But everyone first wanted to see our delivery.

And the company has an execution capacity that impressed me. We managed to finish 2023 with $ 1 billion more of the cashier of what was expected.

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We gained confidence and, still in November 2023, we raised R $ 400 million with the banks. Then we started discussing debt stretches. In March 2024, we made the first, $ 1.5 billion in very short debts. And then, we entered a negotiation for greater stretching.

Infoomoney – How was it?

Franklin – It was a very technical negotiation, putting in the model what it took to make the company stand up, regardless of the scenario, because no one always knows what the macro will look like – at the time, the tendency was that interest would lower, and see what happened.

We simulated several scenarios and did a very conservative business, increasing the debt deadline from one to six years and reducing the cost of capital by almost one percentage point, with CDI + 1.2% of average cost. It is a very competitive cost that allows management to focus on solving operational problems.

Another new thing went to talk about we were a kind of unprecedented case in Brazil. It was not asking for protection to gain time. We first negotiated with the creditors, reached an agreement and approved with a judge to give legal certainty. The market received very well.

Infomoney – At the time, you said that debt restructuring was a structural and definitive solution. In fact, was it?

Franklin – From the cash flow and liability Lower in the management of liabilities, yes. From the point of view of capital structure, no. The liability was elongated, we gained time and took the short term pressure. But we still have two missions.

The first is in the operational, which has come well aligned with the plan, but still missing. We already generated cash – before we consumed $ 32 billion a year in operational cash flow, because it was investing in a lot at the same time. In 2024, we generated almost $ 1 billion of positive cash flow, 2025 has everything to be better, but we have to continue to have an operation that is sustained.

The second challenge is to resolve the capital structure, working with a lower leverage. We have $ 4 billion in debt, and we still anticipate receivables.

But if we have a leverage under a solid capital structure, as we have a very strong credit business for the consumer and also for suppliers, you can make even more money when the macro is challenging. After all, if banks restrict credit, the horizon for the company increases.

This is what we want, so we need to solve the capital structure, which goes through three levers. One is the operational improvement, which generates company cash. Another is to resolve the company’s liabilities, such as labor, which is walking well to have a smaller expense. The third is the monetization of tax credits – we are managing to monetize almost $ 100 million per month. Other than that, it still has the conversion of part of the debt to equity [ações]to which banks are entitled to renegotiation, from October 2025.

Infomoney – The tendency is for banks to exercise this debt conversion to equity?

Franklin – The decision is discretionary of banks. But as they have a great exhibition, we understand that it makes sense. They have a financial incentive, including because they can convert debt into shares with a discount on the average value of papers. It is better for the whole ecosystem, including creditors and the company. Solving the operational and the capital structure, we were able to take advantage of opportunities from 2026, starting a growth cycle – because it is obvious that we want discipline, but growth as well.

Infoomoney – What would be a healthy level of leverage for Casas Bahia?

Franklin – Our leverage for the purpose of covenant It’s low. The problem is the need for working capital and the anticipation level in everything that generates financial expense to make cash flow.

Our business has a financial cost. Seeing a lot on the installment credit card, which generates financial expense. The credit generates greater revenue than the financial cost, but it exists. Interest end up affecting my spread. When the capital structure improves, the spread tends to decrease, and this increases the margin of the credit.

And has the financial debt as a whole. We understand that this debt should be half of what is [ou seja, cerca de R$ 2 bilhões] So that we can pay interest and still money to invest in growth, remunerate shareholders and have a sustainable cycle.

Infoomoney – In 4T24, the loss of Casas Bahia’s house was reduced to less than half. What were the reasons for this improvement?

Franklin – We grew 17% in sales of physical stores and the credit has grown more than 30%. The Ebitda Margin was the best for a fourth quarter since 2017. The gross margin was also very good.

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Obviously there is still a lot of lever to capture, we are not on the ceiling, but the operating result was very positive. It just wasn’t even better because high interest rates and leverage ended up consuming much of Ebitda.

We don’t have guidance For the market, our job is to improve the margin every quarter, regardless of seasonality. There is no silver bullet, no one will see a leap overnight.

Infoomoney – Is there already a horizon when Casas Bahia is again a profitable company?

Franklin – We have the date of our business plan, but it is not open to the market. There are challenges in the macroeconomic scenario, we still have work to do to reach the last positive line.

After the transformation and resolve the capital structure, yes, in 2026, we can start discussing net profit.