Vulcabras posted double-digit growth in the last three months of the year, despite the impact of the pandemic on the shoe market in Brazil. Revenues rose by 22.8 percent from the year-ago quarter to 459.1 million Brazilian reais (€66.7m-$79.4m) and net income jumped by 21.1 percent to R$54.6 million (€7.9m-$9.4m).
The company maintained the price of its products in the new collections sold in the second half of the year, and also granted longer payment terms in order to support its customers in the process of resuming retail. It also claims that its business model, which relies for the most part on in-house shoe production at two modern factories in the Brazilian Northeast, is giving it a unique agility in responding to the Covid-19 crisis, positioning it as an attractive “smart choice” for domestic retailers, helping them with their re-stocking process more than other vendors that rely on imported products. The management believes these efforts provided market share growth for its brands.
During the quarter, e-commerce rocketed by 81.3 percent to R$14.5 million (€2.1m-$2.5m). The company is planning to invest further in the development of online sales, with a new distribution center in Extrema, which will enter into full operation in the second half of March. The new distribution center will have a logistics operation dedicated to all the brands’ e-commerce and also with the operation of distribution of finished products purchased from third parties, imported and domestic.
After production restrictions in the spring and early summer due to the pandemic, Vulcabras resumed full operations at its factories in July, capitalizing on a robust order backlog. It managed to lift overall sales in the second half, but sales of women’s shoes were lower as the company prepared to exit the business, except for a small activity in South America, to focus on sports with its Olympikus brand and the distribution of Under Armour in Brazil. Vulcabras will now focus on sports shoes and apparel, after signing a license agreement with Grendene for the Azaleia brand.
In Brazil, the group’s sales advanced by 24.3 percent in the quarter, due to growth in almost all categories, with women footwear being the only exception. With the reopening of physical stores, even with restrictions on access and opening hours, retail sales once again were the main source of revenues. Abroad, sales increased by 6.6 percent to account for 7.4 percent of turnover, compared with 8.5 percent in the fourth quarter of 2019. Argentina showed strong growth.
Overall sales of athletic shoes progressed by 21.7 percent to R$334.1 million (€48.6m-$57.8m) in the fourth quarter. However, the company’s two brands of women’s shoes, Azaleia and Dijean, recorded a drop of 7.2 percent to R$53.2 million (€7.7m-$9.2m). Other footwear rose by 87.5 percent to R$33.0 million (€4.8m-$5.7m), and apparel and accessories advanced by 59.0 percent to R$38.8 million (€5.6m-$6.7m).
Despite the resumption of production levels and the recovery of the order backlog, the gross margin was still negatively impacted by higher costs of goods produced due to increased absenteeism and higher raw material prices. It inched down by 3.1 percentage points to 35.8 percent. The Ebitda margin remained flat at 16.1 percent of revenues.
For the full year, sales declined by 13.3 percent to R$1,179.2 million (€173.1m-$206.2m), the gross margin fell by 5.2 percentage points to 29.5 percent and net income dropped by 77.9 percent to 31.5 million (€4.6m-$5.5m).
On Jan. 29, 2021, Vulcabras completed the acquisition of Mizuno’s operation in Brazil. With the integration of this brand into its sports portfolio, as well as the licensing of the Azaleia brand to Grendene, Vulcabras said it has concluded its strategic transition, which began in 2018 with the acquisition of the right to use the Under Armour brand name in Brazil.