Vulcabras, the big Brazilian company that owns the Azaleia and Olympikus brands and markets Reebok shoes in three Latin American countries, has decided to postpone its planned public offering to next year. The main reason given for the decision is that fact that Arezzo, the largest retailer of women's shoes in Brazil, and other important Brazilian companies went public earlier this year, absorbing the resources of institutional and private investors.

A few days ago Arezzo, which already claims a 10 percent share of the Brazilian women's shoe market, confirmed a report that it was in negotiations for the acquisition of Santa Lolla, another Brazilian chain of more than 100 franchised stores that sell different kinds of women's shoes. On Saturday, however, the company reported that the negotiations had been terminated because the two parties could not reach an agreement. Arezzo said it will continue to assess different investment opportunities in line with its strategy.

The announcement had sent up the share price of the Arezzo & Co. group by 18 percent, which went public on the new market of the Brazilian stock exchange (BMF & Bovespa) last Feb. 2, raising 196.0 million Brazilian reais (€87.3m-$125.1m). The IPO reduced the shareholding of the founding family of Anderson Birman and his son Alexandre to just over 53 percent. It also lowered from 25 to 11 percent the stake acquired in 2007 by an institutional investor, Tarpon Investimentos, in connection with a merger between Arezzo and Schutz, the footwear brand founded by Alexandre 17 years ago.

Before it went public, Arezzo & Co. said that proceeds from the IPO might be used for strategic acquisitions in complementary areas. They were also supposed to help the company in part to improve the efficiency of its operations, to expand the product range, to open new corporate stores and to expand the existing ones.

In contrast with the more recent IPOs of Prada and Salvatore Ferragamo (see previous articles), at Rs$19 (€8.46-$12.13) the introduction price of Arezzo's shares was already at the peak of the expected range, valuing the company at R$1.7 billion (€757.4m-$1,085m), or 18 times the projected net profit for the current year. It has become much higher lately.

In the first quarter ended last March 31, Arezzo & Co. saw its net revenues rise by 23.1 percent to R$138.6 million (€61.8m-$88.4m). The gross margin declined to 40.7 percent from 41.5 percent in the same period a year ago. The operating margin before amortization (Ebitda) dropped to 15.0 percent from 15.4 percent, but the operating margin after amortization (Ebit) jumped by 10.6 percent from 9.2 percent.

The group's gross revenues, which include a variety of sales taxes, rose by 25.3 percent to R$174.4 million (€77.7m-$111.3m). On a comparable store basis, sales increased by 11.0 percent in the company-owned stores in the quarter, while sales to franchisees went up by 9.0 percent. The company ended up with a total of 296 stores on March 31, 10.9 percent more than one year earlier, but the number of company-owned stores increased by 31.8 percent to 29. The number of franchises went up by 9.0 percent to 267. The group has set a goal of 334 stores under its various brands by the end of this year.

An e-commerce operation is due to start for Schutz in Brazil within a couple of months.Arezza has a few franchisees outside Brazil, but it has no plans to expand abroad. It has been considering an investment in the U.S. and it made an experiment in China four years ago, but it did not work out.

For the full year ended last Dec. 31, the group achieved a net profit margin of 11.3 percent on a 38.7 percent jump in net revenues of R$571.5 million (€254.6m-$364.7m). With exports rising by only 14.0 percent to R$50.4 million (€22.5m-$32.2m), the big driver was the buoyant Brazilian market, where the group's gross revenues rose by 41.3 percent to R$662.4 million (€295.1m-$422.7m).

The Arezzo chain, which sells only its own private label, represented the bulk of the domestic turnover with gross sales of R$479.2 million (€213.5m-$305.8m), or 67.2 percent of the group's turnover, but gross sales under the Schutz brand in Brazil jumped by 55.8 percent to R$173.1 million (€77.1m-$110.5m). However, 75.6 percent of Schutz' sales in Brazil were in multi-brand outlets.

Recognized by its ability to offer fresh new styles every week, Arezzo has consistently scored as the best shoe retail franchisor in Brazil since 2004. In addition to its mono-brand shops, Schutz is sold in 1,600 other stores in Brazil and abroad. Launched a couple of years ago, the higher-end Alexandre Birman line has been adopted by major foreign department stores such as Saks, Neiman Marcus and Bergdorf Goodman in New York and Printemps in Paris. Some of its styles are made in Italy.

Anacapri is the latest brand to have been launched by the group. Made of synthetic and ecological materials, it consists mostly of ballerinas and other flat women's shoes and is positioned below Schutz. It was made available for the first time to multi-brand stores at the Couromoda fair in São Paulo last January.

As of the end of last year, the group owned only 29 stores: 13 Arezzo units, 10 Schutz units, five Anacapri stores and one Alexandre Birman store. All but three of all these stores were located in São Paulo and Rio de Janeiro. Own stores represented only 16.6 percent of Arezzo's revenues last year, but the ratio has increased in the past couple of years and is due to increase further.

Out of the 6.4 million pairs of shoes and 412,000 handbags sold by the group, only 17 percent was produced in the group's own factories, located in Rio Grande do Sul.

Arezzo invests heavily in advertising. It also advertises on TV where it ran 343 spots last year.