Grendene posted the best third quarter in its history in terms of gross revenues, and the third best in volumes, as the company recovered, thanks to domestic demand, from a dismal second-quarter performance, caused by the Covid-19 pandemic.
The Brazilian footwear manufacturer posted a 9.5 percent increase in gross revenues to 772.8 million reais (€115.6m-$134.6m), with domestic sales up by 12.4 percent to R$ 655.2 million (€98.0m-$114.1m) and exports down by 4.5 percent to R$ 117.6 million (€17.6m-$20.5m). Domestic sales benefited from the general economic recovery as Covid-19 related restriction were lifted, reorders and purchases ahead of the year-end season. Meanwhile exports were affected by a sharp decline in unit prices as Grendene shipped more to Latin American countries, which consume a larger proportion of basic products, and launched promotional campaigns in some markets to speed up inventory turnover.
Sales in volumes jumped by 22.6 percent to 53.0 million pairs, with domestic sales up by 23.4 percent to 43.9 million and exports up by 18.8 percent to 9.1 million. However, growth was hindered by a drop in gross revenue per pair, which fell by 10.7 percent to R$ 14.58 (€2.18-$2.54), driven by a 19.6 percent decline to R$ 12.93 (€1.94-$2.25) for exported shoes. For the domestic market, gross revenue per pair dropped by 8.9 percent to R$ 14.92 (€2.23-$2.60), derived from more sales to distributors and wholesalers, who then resale to supermarkets and convenience stores, as well as direct sales to hypermarkets and supermarkets. Those channels typically buy lower ticket goods. From August, Grendene enjoyed an upturn in sales, which accelerated in September, to specialized footwear and apparel stores and department stores.
Recurring Ebit grew by 20.3 percent to R$ 134.0 million (€20.1m-$23.3m) and recurring net profit dropped by 8.2 percent to R$ 117.9 million (€17.6m-$20.5m).
The company pointed out that the outlook is improving faster than expected, but warned that the impact of a second-wave of the Covid-19 pandemic remains unknown. Grendene is nevertheless optimistic about the fourth quarter, having hired more than 3,000 temporary workers. It added that a scarcity of resin, triggered by programmed plant closures in Brazil and abroad, is expected to be overcome in December, when the resin market is scheduled to return to normal production levels.
During the third quarter, Grendene’s franchise network of Melissa Clubs closed a net four locations. On Sept. 30, there were 325 franchised and four directly-managed Melissa Clubs in Brazil. By the end of the year, the first of 10 Melissa stores planned in the U.S. is scheduled to open in Los Angeles. While three store openings are planned in China from March 2021.
The company also pursued its policy of bringing digital sales in-house. During the quarter, it launched the proprietary e-commerce platform of the Zaxy brand, and migrated the platforms of Melissa USA and Ryder Brasil. It aims to complete the migration of online sales of all brands by the end of the first quarter of 2021.