The world's biggest pure e-commerce player in the sporting goods sector remained in the red in the third quarter and the first nine months of this year. It reported net losses of 30.3 million Brazilian reais (€7.9m-$9.3m) for the latest quarter and of R$120.6 million (€31.4m-$37.0m) for the nine months. Excluding extraordinary items, Netshoes booked adjusted net income of R$33.0 million (€8.6m-$10.1m) for the three months and R$128.9 million (€33.6m-$39.6m) for the nine months.
It will be interesting to see what will happen in the fourth quarter, the most profitable one in the Brazilian company's financial year. It will include its traditional “Black November” promotion, a Brazilian version of Black Friday that proposes discounts throughout the month.
For the third quarter ended Sept. 30, Netshoes reported a negative Ebitda margin of 4.6 percent, compared with a negative margin of 0.6 percent in the year–ago period, while total net sales rose by 7.3 percent to R$444.6 million (€115.8m-$136.5m). Sales went up by 8.8 percent on a currency-neutral basis, but they would have risen by 13.3 percent without the negative impact of a B2B operation in the nutritional segment, which is being restructured.
Sales increased by 11.9 percent to R$1,302.2 million (€339.0m-$399.8m) for the whole nine-month period, and they were up by 14.5 percent in local currencies. The Ebitda margin improved, reaching a negative level of only 2.0 percent against a negative margin of 4.4 percent in the year-ago period.
The results were affected by a restructuring charge for the B2B operation and the company's costly expansion into other Latin American countries. Without the charge, Netshoes would have had negative Ebitda margins of 1.3 percent of sales in the third quarter and 2.7 percent for the first nine months. Excluding the charge as well as the company's operations outside Brazil, which remained in the red, the domestic Ebitda margin would have still been negative at 1.5 percent in the third quarter, but positive for the nine months at 0.2 percent of sales – an improvement of 1.7 percentage points from the corresponding period of 2016.
Net sales went up in Brazil by 7.2 percent to R$397.0 million (€103.4m-$121.9m) in the third quarter, with the core sporting goods category recording a 15.7 percent increase in gross merchandise volume (GMV). Revenues from Netshoes' internet marketplace jumped by 419 percent, representing 9.7 percent of the total GMV. Sales of private label items grew strongly, building up to 11.0 percent of domestic sales. The group's recently launched fashion and beauty operation, Zattini, grew by 51.9 percent, and it began to offer toys as well.
Adding foreign operations, Netshoes' total gross merchandise volume grew by 15.4 percent to R$609 million (€158.6m-$187.0m) in the quarter, with a 17.0 percent increase in local currencies. The total number of registered members increased by 21.2 percent to 20.9 million. The number of active customers expanded by 18.5 percent to 6.2 million and 46.7 percent of them placed orders through mobile devices, up from 33.5 percent a year ago.
Netshoes has improved efficiencies and service levels by offering customers the possibility of collecting their purchases from almost 7,000 pick-up points in partnership with Correios.
In October, Gabriela Garcia joined the group in the new position of chief business transformation officer, charged with leading an internal cultural transformation and supporting the execution of short-term improvements and long-term strategies. A graduate from Harvard Business School, she has worked for more than 20 years with companies such as McKinsey and Hypermarcas, where she led over 20 mergers and acquisitions.