Grendene is reinforcing its links with Vulcabras, which is controlled by other members of the Grendene family, with a licencing agreement to produce and sell women's shoes under the Azaleia and Dijean brand names in thermoplastic materials. Grendene, which is the parent company of Ipanema, Melissa, Grendha and Rider, has a lot of expertise in the use of these materials.
The licensing deal will have an initial duration of three years, with an option for renewal for another three years. Vulcabras will be responsible for the institutional management of the products and for their distribution. Grendene stresses that it will pay Vulcabras for its services in accordance with market standards.
Separately, Grendene has reported a 1.2 percent decline in its gross revenues to 730.1 million reais (€230.4m-$286.5m) for the third quarter ended Sept. 30, with decreases of 0.8 percent in Brazil and 2.9 percent in export markets. The declines were due exclusively to drops in average selling prices, as volumes increased by 0.6 percent to 43.5 million pairs in Brazil and by 4.3 percent to 11.4 million pairs abroad.
Foreign deliveries generated revenues of R$139.2 million (€44.0m-$54.6m). Grendene maintained its position as Brazil's largest shoe exporter in terms of volume, although its share of total exports declined to 37.5 percent from 38.6 percent in the same quarter a year ago.
Regarding the domestic market, Grendene said it was worse than anticipated and predicted no recovery in the short term. In the first nine months of 2014, its total sales in Brazil declined by 3.4 percent to R$1,424.3 million (€450.0m-$559.0m), whereas exports increased by 10.2 percent to R$409.9 million (€129.4m-$160.8m).
The gross margin improved to 47.7 percent from 47.0 percent in the year-ago period, but operating margins declined to 19.6 percent before amortization (Ebitda) and to 17.6 percent after amortization (Ebit). The company blamed in particular the 6.8 percent increase in the Brazilian minimum wage last January.
Nevertheless, the company was able to report a 3.2 percent increase in net profit to R$126.0 million (€39.8m-$49.4m). It was achieved in spite of an increase in the marketing spend to 8.9 percent of sales from 7.6 percent a year ago.
Grendene noted that its net earnings have doubled since it went public ten years ago. It is still maintaining its target to raise profits at a compound annual rate of between 12 and 15 percent.
The company reported good progress for Melissa. It opened a new Galeria Melissa store in London on Oct. 9 and plans to open one in an Asian city next year. In Brazil, the number of franchised Clube Melissa stores has reached 150 and is targeting 200 by next year. The format is profitable and its potential is higher than initially estimated.