For the second consecutive quarter, Grendene posted record sales as the company recovered from a dismal second quarter thanks to strong domestic demand.
The Brazilian footwear manufacturer posted a 29.5 percent increase in gross revenues to 1,029.4 million reais (€152.1m-$181.5m) in the fourth quarter, with domestic sales up by 40.8 percent to R$849.9 million (€125.6m-$149.9m) and exports down by 6.1 percent to R$179.5 million (€26.5m-$31.7m). Domestic sales benefited from the general economic recovery after restrictions related to Covid-19 were lifted, as well as the scarcity of raw materials, which led to a concentration of orders through major footwear manufacturers, due to the fact that store owners feared product shortages on Black Friday and Christmas.
The company maintained the strong rate of recovery it achieved in the third quarter, despite the slight slowdown in growth of the Brazilian and international economies. Spring and summer collections performed well. There was also greater demand for cheaper footwear models such as flipflops and sliders, to the detriment of other types. All segments performed better than in the fourth quarter of 2019, especially slippers, sliders and two-strap sandals for men.
In exports, the worsening of the pandemic in several regions of the world led to new restrictions, reducing the flow of tourists and customer traffic in physical stores, especially in Europe and the United States. This affected consumption of Grendene’s products, and caused higher than usual levels of inventories at distributors and for retail store owners.
Overall, this was still one of the best quarters for Grendene in terms of volume, with 62.1 million pair sold, compared with 49.0 million for the year-ago quarter, including a 36 percent gain in Brazil and a 5.4 percent drop abroad.
The company estimates that it gained 3.6 percentage points in domestic market share over the course of the year.
There was also a 2.2 percent gain in gross revenues per pair to R$16.58 (€2.45-$2.92), driven by a 3.5 percent increase for domestic shoes, due to a price hike implemented in October to compensate the effect of the increases in prices of raw materials. For the export market, gross revenues per pair inched down by 0.9 percent.
This helped mitigate the negative performance of the second quarter, when Grendene billed practically zero, due to the government’s decree prohibiting resumption of non-essential activities to combat Covid-19. As a result, gross revenues for the full year were 7.1 percent lower than in 2019 to R$2334.8 million (€345.1m-$411.8m), and the volume of pairs shipped was 3.6 percent lower to 145.4 million pairs.
The gross margin for the fourth quarter contracted by 1.1 percentage point from the year-ago quarter to 49.6 percent, but increased by 0.5 percentage points for the full year to 46.1 percent. The Ebit margin gained 3.8 percentage points in the fourth quarter to 26.4 percent, but dropped by 11.6 percentage points to 15.9 percent for the full year.
Net income for 2020 tumbled by 50.5 percent from the previous year to R$405.2 million (€59.9m-$71.5m), despite a 47.7 percent gain in the fourth quarter to R$309.0 million (€45.7m-$54.5m).
During the year, Grendene’s franchise network of Melissa Clubs opened a net 12 locations. On Dec. 31, there were 348 active Clubs. Three store openings are planned in China from March 2021.
The company also pursued its policy of bringing digital sales in house. During the fourth quarter, it continued the migration of online operations of its external partner for Grendene’s proprietary e-commerce platform, through the launch of direct online sales operations for Rider, Grendene Kids and Ipanema. It also launched the online B2B sales platform for store owners of all the company’s brands. By the end of the first quarter of 2021, all of its brands will be operating on its proprietary platforms.
The company’s cash position at the end of the year was at a solid R$2 billion (€295.7m-$352.7m). Grendene did not release a guidance for 2021.