Casas Bahia on the brink: The cost of debt in a 14% interest rate environment

Brazilian retail giant Casas Bahia has issued a critical warning, admitting the possibility of a new judicial or extrajudicial reorganization after reporting a R$ 10.1 billion loss in Q2 2026. The company faces an existential dilemma: with capital costs pressured by the 14% Selic rate, its operational structure has become unsustainable amid shrinking consumption and rising default rates. This crisis reflects years of prioritizing aggressive physical expansion over capital efficiency. Macroeconomic headwinds, including a dollar at R$ 5.22 and 4.44% inflation, have eroded the purchasing power of its price-sensitive customer base. Having already closed 298 stores, the retailer is trapped in a forced deleveraging cycle, with high debt costs outpacing its ROIC. Analysts warn that without a reversal in cash burn, judicial reorganization appears increasingly likely, signaling a broader struggle for mass-market retailers in the current credit cycle.