Brazil's Americanas CEO Rial, CFO Covre resign amid $3.8 billion accounting `inconsistency`

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SAO PAULO (Reuters) - Brazilian retailer Americanas SA said on Wednesday its chief executive and chief financial officer had resigned after the discovery of around 20 billion reais ($3.88 billion) in accounting "inconsistencies."

Lojas Americanas CEO Sergio Rial departed less than two weeks after taking the job, after six years heading lender Santander (BME:SAN) Brasil. Rial replaced Miguel Gutierrez, who was CEO and head of investor relations.

CFO Andre Covre also had just joined Lojas Americanas, long controlled by Brazilian billionaires Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, founders of 3G Capital.

The "accounting inconsistencies" value is larger than the company´s net equity, 15 billion reais, said Fabrício Gonçalvez, CEO at Box Asset Management.

"This is awful news for the retail sector, specially considering it happened with a large company such as Americanas", said Gonçalvez. "How can $3.9 billion escape from auditors?"

Despite his resignation, Rial will continue to advise 3G Capital, the firm said. He is currently chairman of the board at fuel distributor Vibra Energia, a board member at BRF SA (NYSE:BRFS) and at Delta Air Lines (NYSE:DAL).

In late 2021, founders of private equity firm 3G Capital, which controls behemoths such as beverages maker Anheuser Busch Inbev (EBR:ABI) and Kraft Heinz (NASDAQ:KHC) Co reduced their stake in the retailer as part of a restructuring but continue to be "reference shareholders."

The disparities found "reduced the balance in the suppliers account related to previous fiscal years" and are estimated to be of around 20 billion reais ($3.88 billion), or almost twice the Americanas' 10.7 billion reais market capitalization, according to Refinitiv data.

The firm also estimated that the cash impact of the inconsistencies is not material. However, it is not possible to assess all of its impacts on Americanas income statement and balance sheet.

Brazilian retailers are under pressure from high borrowing costs. Americanas shares ended 2022 with a 68.7% slump, but since then have climbed about 24%.

Among the inconsistencies, Americanas cited supplier financing operations in which the firm is a debtor to financial institutions and are not "adequately reflected in the suppliers account in the financial statements dated Sept. 30, 2022," it said.

Joao Guerra, a long-time executive in the retailer who had not been previously involved with accounting or financial management, will take over as CEO on an interim basis.

The accounting problems will make unfeasible the recently announced plan to migrate the company to U.S. markets, that had been delayed late last year.

($1 = 5.1600 reais)