Alpargatas, the Brazilian company that owns Havaianas and licenses Mizuno, reports that its performance has started recovering compared with the first half of the year, but the Brazilian group's turnover and net profit in the third quarter remained below the year-ago period.

The group's sales tumbled by 3.2 percent to 951.1 million reais (€249.1m-$292.0m) for the quarter. Its gross profit margin improved by 0.9 percentage points to 43.5 percent, driven by the impact of cost reductions and a shift to more valuable products, but its operating profit (Ebitda) margin dipped by 1.5 percentage points to 11.5 percent. Alpargatas ended the quarter with income from continuing operations of R$71.3 million (€18.7m-$21.9m), down by 15.0 percent for the quarter. The group added that, excluding products invoiced but not yet delivered, its performance for the quarter improved on a pro forma basis, with a sales increase of 1.9 percent and a jump in income of 19.8 percent.

The quarter included another change of ownership at Alpargatas, as J&F Investimentos struck a deal to sell its controlling stake of 85.7 percent to three Brazilian investment firms for R$3.5 billion (€916.0m-$1,073.8m). Cambuhy Investimentos, Itaúsa Investimentos and Brasil Warrant, which have equal shares in the company, are all controlled by the families of prominent Brazilian bankers.

Alpargatas held up relatively well in Brazil, where sales fell by 1.1 percent to R$670.5 million (€175.4m-$205.6m), as improved sales of the Mizuno and Osklen brands nearly made up for a decline in sales of sandals. The average price of the company's sandals and related Havaianas products firmed up by 3.2 percent in Brazil, but this could not make up for the decline in volume in this category.

The gross profit margin of the Brazilian operations moved up by 2.2 percentage points to 46.0 percent, driven by the Havaianas and Mizuno brands and aided by cost reduction programs. However, the operating profit margin slightly declined, due to other non-recurrent costs, mostly the provision for costs related to the change in controlling stockholders.

The international sandals division saw its turnover dip by 1.8 percent to R$108.4 million (€28.4m-$33.2m) for the quarter. While average export prices increased, sales were down in the U.S. and Europe, the Middle East and Africa (EMEA). Hurricane Irma was identified as one of the reasons for the drop of 5.1 percent in the U.S. in dollars, with declines in Havaianas stores and with independent retailers. Unfavorable weather affected sales in England, France and Germany, pushing sales in EMEA down by 3.2 percent in euros. The 2.6 appreciation of the real against the dollar contributed to the reported sales decline for the international sandals business.

The growth in exports did push up the international sandals division's gross profit margin up by 0.6 percentage points to 67.2 percent. Yet this increase could not make up for a lower productivity in marketing and other costs, resulting in a decline in operating profit margin by 5.2 percentage points to a negative margin of 0.7 percent.

The group's sales in Argentina contracted by 11.3 percent to R$172.2 million (€45.1m-$52.8m), which was blamed on competition from lower-priced imported products. The rise in average prices of footwear and textiles was enough to increase sales by 5.2 percent in pesos, supported by a 27.0 percent leap in online sales. But the group's reported turnover in Argentina declined due to the 15.7 percent appreciation of the real against the peso, and an increase in production costs led to lower gross and operating profit margins.

The volume of sales in the sandals category contracted by 5.7 percent in Brazil to nearly 53.8 million pairs, while sales in international markets shrank by 10.3 percent to less than 4.6 million pairs. Apart from the weather issues in the U.S. and Europe, the group suspended its exports of sandals to Colombia, due to a transition to a new business model in the country.

Sales of sports shoes were up by 29.6 percent to more than 1.2 million in Brazil but they declined by 8.9 percent to just under 1.37 million in Argentina. Mizuno's footwear sales were pushed up by the widened offer of products manufactured and assembled in Brazil. But footwear sales in Argentina were affected by cheaper imports, and the Topper brand was also affected by the growth in the number of points of sale targeted by its competitors, which have widened their reach to small footwear chains.

The opposite trend applies for sports apparel, for which Alpargatas reported a decline of 14.4 percent in volume in Brazil but a rise of 29.3 percent in Argentina. Mizuno's apparel sales were down for the quarter, as Alpargatas opted to sell a reduced range of products and to focus on the more valuable items. The Osklen brand raised its volumes by 13.2 percent for the quarter, driven by a 50 percent rise in sales to multi-brand stores, and a 25.5 percent increase in online store sales.

The Alpargatas group's retail's sales were down by 4.0 percent on a comparable basis for Havaianas franchises in Brazil. This was blamed chiefly on weaker sales in Rio de Janeiro, where the market has suffered from a decrease in income and a weaker inflow of tourists. Osklen's retail sales were up by 2.0 percent for the period, with improved consumption trends in some markets, such as São Paulo.

Adding the weak first half, the group's sales were down by 12.4 percent to R$2,618.2 million (€685.0m-$803.1m) for the first nine months of this year, with declines across its Brazilian and Argentina business, as well as its international sandals division. Its gross profit margin eased by 0.9 percentage point to 44.1 percent but the operating profit margin firmed up by 2.0 percentage points to 16.4 percent. Alpargatas ended the nine months with income of R$307.2 million (€80.4m-$94.2m), up by 18.7 percent.