The volume of sandals sold by Alpargatas in Brazil under its Havaianas and Dupé brands rose by 33.1 percent to 47.4 million pairs in the first quarter of 2018, helping the company to improve the gross margin generated in its home market by 4.5 percentage points to 46.1 percent and to boost domestic Ebitda strongly. Even after excluding a shift in the timing of deliveries, the number of pairs sold in Brazil increased by 6.8 percent, and average selling prices went up.
Sales grew by 19.0 percent at Alpargatas Argentina in terms of local pesos, due in part to inflation, but gross and operating margins declined because of lower manufacturing efficiency.
The company's international sandals business recorded a drop in the volume of shipments of 20.9 percent to 7.1 million pairs, with declines in most regions except for the rest of Latin America. The gross margin on these operations improved by 1.3 percentage points, but it was insufficient to offset operating expenses, leading to a drop in the Ebitda margin.
Alpargatas blamed lower exports to some distributors serviced by Alpargatas Europe, a review of the distribution strategy in the U.S. and high inventories of its own products held by distributors in certain countries in the Asia-Pacific region.
Meanwhile, Alpargatas' sales of Mizuno and Topper sports products went up in Brazil and Argentina, thanks to the release of new products under the licensed Japanese brand and growing demand in Argentina for higher-end Topper styles. The Osklen brand of sportswear also performed better.
Across the group, net revenues increased by 11.7 percent in the quarter to R$ 902.1 million (€209.8m-$250.6m). They rose by 22.9 percent to R$ 572.9 million (€133.3m-$159.2m) in Brazil, where the share taken by sales of sandals rose to 75 percent from 70 percent, but they declined elsewhere.
The International sandals business posted a 4.4 percent drop in revenues to R$ 179.1 million (€41.7m-$49.8m), with declines in local currencies of 18.0 percent in Europe, the Middle East and Africa (EMEA), 9.0 percent in the U.S. and 47.4 percent in Asia-Pacific. The drop in EMEA was affected by the postponement of billing for some multi-brand retail customers from March to April.
The gross margin improved by 1.9 percentage points, boosted by increases to 46.1 percent in Brazil and 65.0 percent for the international sandals business. The group's adjusted Ebitda margin went up by 2.9 percentage points to 14.3 percent. However, the group reported a drop of 37.2 percent in net income to R$ 112.8 million (€26.2m-$31.3m) for the period, due to special charges in Brazil and Argentina.
Investments were made during the quarter in new Havaianas stores in the U.S. and Europe. The total number of corporate and franchised Havaianas stores remained largely constant at 435 units in Brazil, but it increased overseas to 195 doors from 154 doors in March 2017.