The parent company of Havaianas, Dupé and other sportier brands improved its net income by 7.6 percent to 87.5 million reais (€34.9m-$46.3m) in the third quarter ended Sept. 30 in spite of a 28 percent increase in the cost of rubber. In releasing Alpargatas' results for the period, the management noted that the dollar price of rubber has declined by about 17 percent since the end of September, indicating a downward trend that should benefit the company's profitability in the medium term.
Net consolidated revenues grew by 18.4 percent to R$687.5 million (€274.6m-$363.6m), with a 21.8 percent increase in constant currencies, offsetting the increased manufacturing costs. As a result, gross profit went up by 20.4 percent, leading to improved gross margins of 49.6 percent in Brazil, 28.7 percent in Argentina and 45.5 percent company-wide – 0.7 percentage points higher than in the same period a year ago.
The operating margin before amortization (Ebitda) declined, however, by 4.0 percentage points to 15.8 percent, due in part to strategic investments of R$15.5 million (€6.2m-$8.2m) in brand communication, intended to push sales. Out of that, R$3.3 million (€1.3m-$1.7m) was spent in the U.S. and Europe. If prices for cotton and rubber had remained the same, Alpargatas says it would have reached an Ebitda margin of 18.1 percent.
In Brazil alone, the group's net revenues increased by 18.5 percent to R$513.0 million (€204.9m-$271.3m) in the quarter, although they were up in volume by only 2 percent. Higher prices and a richer product mix allowed the company to record a 15.3 percent increase in sales of Havaianas and Dupé sandals in the country, backed by new TV spots and other marketing actions.
In the sporting goods segment, Alpargatas' sales of Timberland products grew by 33 percent, while those of Topper, Rainha, Mizuno and Sete Légues went up by 26 percent (more in Sporting Goods Intelligence Europe).
Alpargatas' business outside Brazil showed an increase of 18.1 percent in consolidated sales to R$174.5 million (€69.7m-$92.3m) in the quarter, although the total volume was more or less the same. In local currencies, sales were up by 23.7 percent in the U.S., by 33.9 percent in Argentina and by 41.2 percent in Europe. Exports from Brazil to foreign distributors rose by 18.8 percent in U.S. dollars.
The company reached Ebitda margins of 12.4 percent in Argentina and 15.9 percent in the U.S. and Europe combined. Havaianas' new stores in London, Paris and Rome performed very well, says Alpargatas. A Havaianas shop-in-shop was launched inside Bloomingdale's department store in New York, allowing clients to customize their sandals.
The outlook for the balance of the financial year remains positive. So far into the fourth quarter, the demand for the company's products has exceeded projections.