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Brazilian store owners expect the best holiday sales in eight years as government tax cuts and a revival in consumer finance bolster demand.

Sales revenue will rise 12 percent in the Christmas season, up from 9.5 percent last year and the most since 2001, according to 66 percent of the store owners polled by the national association of mall retailers, known as Alshop, and consulting company Deloitte Touche Tohmatsu.

“When the government takes action and cuts taxes, this reflects directly in sales incentives,” Nabil Sahyoun, the president of Alshop, said in a telephone interview from Sao Paulo. As competition picks up, shops also are letting customers finance purchases with credit over longer periods of time without interest, he said.

After real estate, the retail and consumer goods industry has been the best performer in Brazil this year as the Bovespa index climbed 85 percent, according to Raymond James & Associates Inc. Lojas Americanas SA, Brazil’s biggest discount retailer, and Lojas Renner SA, the nation’s largest publicly traded clothing retailer, each more than doubled this year.

Labor Market

Brazilian retailers probably will increase earnings before interest, taxes, depreciation and amortization by 16 percent in the fourth quarter as a “buoyant” labor market and expanding credit boosts sales, according to New York-based Goldman Sachs Group Inc. Ebitda will likely expand more than 23 percent next year, Goldman Sachs analyst Irma Sgarz wrote in a Dec. 1 report.

Lojas Americanas, based in Rio de Janeiro, reported a fivefold surge in third-quarter profit Nov. 6. The shares rose 0.8 percent to 15.70 today and are up 150 percent this year. Lojas Renner of Porto Alegre, which had third-quarter earnings of 30.6 million reais ($17.4 million), slipped 0.1 percent to 38.35 reais. The stock has risen 145 percent this year.

Brazil’s “2009 holiday season could be the best of the last 10 years,” Raymond James said in a report Dec. 10. “Retailers and consumer goods companies are getting ready for what looks like the strongest quarterly sales in many years,” Sao Paulo-based analyst Daniela Bretthauer and economist Mauricio Rosal wrote.

Lojas Renner and Lojas Americanas declined to comment on their outlook for holiday sales, according to e-mail statements from their press offices.

October Sales

The government will report retail sales increased 6.5 percent in October, extending gains for the sixth straight month, according to the mean estimate of 25 analysts forecast by Bloomberg. The data for October will be announced Dec. 15. Rosal predicts retail sales rose 6.1 percent compared with the same month last year.

Mall sales account for between 20 and 25 percent of total retail sales in Brazil, the retailer association said. Brazil had 695 shopping malls as of July with a total of about 85,000 stores, according to Alshop. The association will announce Dec. 26 that about 26 new shopping malls opened in Brazil in 2009, said Sahyoun saving account pay day loan.

A 3.1 percent increase in private consumption helped lift Brazil out of its first recession since 2003 in the second quarter of this year, according to Raymond James. The government cut taxes on consumer goods and policy makers lowered the benchmark interest rate to a record low 8.75 percent in a bid to fuel a recovery amid the global economic slowdown.

The improving labor market also signals consumers are willing to spend more during the holiday season, Rosal said in a phone interview from Sao Paulo.

‘Getting Better’

The jobless rate dropped to 7.5 percent in October from 7.7 percent in September. President Luiz Inacio Lula da Silva plans to increase the minimum wage by 8.7 percent next year, Folha de Sao Paulo reported Dec. 9, without saying where it obtained the information.

“The employment market is getting better, the employment numbers in the industry went up again,” Rosal said. “This generates an optimistic tone that makes people more comfortable to spend, and credit conditions are also easier to individual consumers.”

The government will extend tax cuts on computer sales and purchases of capital goods and inject 80 billion reais into the state development bank to ensure the economy will expand 5 percent next year, Finance Minister Guido Mantega said Dec. 9.

GDP Growth

Brazil’s gross domestic product grew at a slower-than- forecast 1.3 percent in the third quarter from the previous three months compared with a revised 1.1 percent in the second quarter. The economy shrank 1.2 percent from a year ago. The central bank predicts GDP will grow 0.8 percent in 2009.

The strengthening of Brazil’s domestic market led to a consolidation in the retail industry this year.

Hypermarcas SA, a Brazilian consumer products company located in Sao Paulo, agreed on Dec. 7 to buy drugmaker Laboratorio Neo Quimica Ltda. to expand into the generic medicine market. It was Hypermarcas’s fifth acquisition in 2009. Its shares rose 1.5 percent to 40.41 reais today and are up 203 percent this year.

Sao Paulo-based Cia Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, agreed to buy Casas Bahia on Dec. 4, in its second acquisition in six months to strengthen its home-appliance business. Pao de Acucar, whose shares doubled this year, had third-quarter net income of 171 million reais. The stock fell 0.6 percent today to 62.60 reais.

Christmas sales “will be good, with heated consumer demand,” Casas Bahia’s Chief Financial Officer Michael Klein said in Brasilia on Dec. 11.

Markets

The benchmark Bovespa index rose 2.5 percent to 69,267.47 last week, led by airline Tam SA preferred shares, which gained 17 percent. Homebuilder Gafisa SA led decliners with a 3 percent drop. Brazil’s real weakened 1.5 percent to 1.7585 reais per dollar.

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