The big Brazilian shoe manufacturer’s exports increased by 34 percent in volume to 4.8 million pairs during the 2nd quarter, but average selling prices declined by 44 percent in terms of reals and by 31 percent in US dollars, leading to a 25 percent decline in their total value to 35 million reals (€12.6m-$15.4m). Domestic revenues increased by 2.4 percent to represent 87 percent of Grendene’s total gross revenues, which ended up 2.5 percent lower than in the year-ago period at R$261 million (€94.2m-$115.2m). In general only the mass segment and children’s footwear fared well.
Gross margins plummeted from 35.9 to 30.7 percent of sales. Operating margins before depreciation and amortization (Ebitda) fell from 15.3 to 8.4 percent, and net margins dropped from 11.8 to 4.4 percent of sales for this company, which went public one year ago. While citing a volatile and challenging macroeconomic environment, the management is expecting a better 2nd half. Advertising and marketing expenditures will be cut back by about 15 percent, while looking for more efficiency in communications.
Higher sales volumes were achieved in Mexico and South America. Overall exports should finally stabilize in terms of value over the next few months, particularly in the 4th quarter, after a long slide partially due to the former success of the Melissa line in the USA. In particular, an increase in demand for Grendene’s sandals is expected later this year from Europe, where its sales were stable in the 2nd quarter, as retailers’ inventories have been depleted by a relatively hot summer.