Net sales revenues declined by 5.0 percent to 414.6 million reais (€165.6m-$219.3m) in the third quarter at Grendene, the other big Brazilian company that makes Grendha, Ipanema, Melissa and Rider shoes, leading to a drop in its net income of 20.3 percent, down to R$83.5 million (€33.3m-$44.2m). Volumes were off by 2.4 percent in the period, ended Sept. 30.

The company's management said its results were within the levels that it expected in the current economic context. It pointed out that there was no GDP growth in Brazil during the quarter, in contrast with the increase of 7 to 8 percent that the economy had enjoyed in the corresponding pre-electoral period of one year ago. Grendene mentioned intense rivalry from other shoe manufacturers recently, while the domestic market's demand has been weakening since last March and the international situation has deteriorated considerably.

The high value of the Brazilian real continued to impact Grendene's exports, reducing them by an estimated R$5 million (€2.0m-$2.6m) in the quarter and by R$20.5 million (€8.2m-$10.8m) for the first nine months of the year. Nevertheless, the company managed to raise its gross revenues from exports in the latest quarter by 5.6 percent to R$73.7 million (€29.4m-$39.0m), with an increase of 12.7 percent in U.S. dollars. The export volume went up by 1.1 percent, but the company raised its export prices by 4.5 percent in reais and by 11.5 percent in dollars.

Predicting increased volatility in exchange rates, Grendene's management felt that its exports will grow at more modest rates in the future and that they will represent a lower percentage of its total revenues. Nevertheless, Grendene performed better than other companies in foreign markets, judging from the 18.5 percent decline in the country's total exports during the quarter (see the previous article on Brazilian shoe exports). Taking into consideration the first nine months of the year, Grendene's share of Brazilian shoe exports rose to 14.2 percent in terms of value from 13.3 percent in the same period of 2010, but in terms of volume it fell to 36.1 percent from 37.2 percent.

In its income statement, which was released before that of Alpargatas, Grendene said it probably improved its overall market share during the latest quarter, but the figures subsequently published by Alpargatas (see related article) told a different story. In the domestic market, Grendene reported declines of 7.5 percent in its own gross revenues, 3.5 percent in the pairage sold and 4.2 percent in their average prices.

Increases in the minimum wage and in input costs caused a 2.2 percent increase to R$5.53 (€2.20-$2.95) in the cost of goods sold for Grendene in the third quarter. As a result, the gross margin declined by 2.5 percentage points to 46.5 percent, although it improved overall for the first nine months of the year.

With advertising expenses rising by 1.0 percentage points to 9.8 percent, the operating margin for the quarter fell by 5.5 percentage points to 14.6 percent before amortization (Ebitda) and by 5.6 percentage points to 12.9 percent before interest (Ebit). The company's overall financial situation remained strong.

In spite of its relatively poor quarterly results, Grendene is maintaining its targets for the next few years, feeling that they are realistic in view of the growing disposable income of the Brazilian population and other factors. Its gross revenues are expected to rise at an annual compound rate of between 8 and 12 percent through 2015, while net profit should increase by 12 to 15 percent per year.